N4 


fl57 


ONCE   GREENBACK,  NOW   SILVER ;     ALWAYS   FIAT  MONEY.      WILL   HE 
BE   DECEIVED   AGAIN? 


THE   MONEY   WE   NEED 


A    SHOUT  PEIMER 

ON 

MONEY  AND    CURRENCY 


BY 

HENRY   LOOMIS  NELSON 
u 

TJie  good  money  that  we  have  is  enough 
Any  cheap  money  is  too  much 


NEW    YORK 
HARPER    &    BROTHERS    PUBLISHERS 

1895 


Copyright,  1895,  by  HARPER  &  BROTHERS. 

All  rights  reserved. 


NOTE 

THE  diagrams  accompanying  the  paper  on  "The 
Money  We  Need  "  were  prepared  by  Mr.  WORTHINGTON 
C.  FORD,  Chief  of  the  Bureau  of  Statistics,  at  Washing- 
ton, and  for  this  and  other  kind  assistance  I  desire  to 
thank  him  and  the  Hon.  JOHN  DEWITT  WARNER. 

II.  L.  JST. 


M170681 


CONTENTS 


PAGE 

THE  MONEY  WE  NEED 1 

BIMETALLISM   IN    HISTORY  .    81 


ILLUSTRATIONS 


ONCE  GREENBACK,  NOW  SILVER ;    ALWAYS  FIAT  MONEY. 

WILL  HE  BE  DECEIVED  AGAIN  ? Frontispiece 

THE  SILVER  DOLLAR  UNDISGUISED Facing  page  10 

UNITED    STATES    SILVER   AND    NATIONAL    BANK-NOTES, 

1874-1894 "  "  30 

MONEY  OF  THE  UNITED  STATES "  "  38 

PRODUCTION  AND  PRICE  OF  SILVER "  "  44 

PRICES  OF  WHEAT,  CORN,  AND  COTTON M  «  52 

HIGH-TONED,  HIGH-STRUNG  U.  S.  (TO  DIOGENES).  "ANY 

INSINUATIONS?      YOU    GOLD -BUG!     YOU   SHYLOCK  ! 

YOU     BLOATED    BONDHOLDER  !        YOU     CAPITALIST  ! 

YOU  ARE  PURCHASED  BY  WALL-STREET  SHARKS  "  .  "  "  60 
THE  COMRADES  THAT  FREE  COINAGE  WOULD  MAKE  FOR 

UNCLE  SAM u       u          ^ 

THE  DEAD-HORSE  PARTY  THINKS  IT  IS  DOING  ALL  THE 

WORK  .  "      "          78 


THE  MONEY  WE  NEED 


THE  subject  of  money  and  the  laws  which  govern 
its  distribution  have  been  made  to  appear  so  compli- 
cated that  not  only  persons  of  ordinary  intelligence, 
but  experts  on  other  subjects,  shrink  from  an  article 
or  a  book  on  money  on  account  of  its  presumed  in- 
comprehensibility. A  strange  mystery  has  grown  up 
in  connection  with  a  subject  that  concerns  every  civ- 
ilized human  being,  and  this  mystery  has  been  det- 
rimental to  the  interests  of  commerce  in  goods  and 
services.  The  ills  that  come  to  merchants,  manufac- 
turers, and  working-men — to  all  who  have  anything 
to  sell  or  any  desire  to  buy — have  been  increased  and 
complicated  by  the  money  question  as  it  has  been 
presented  in  different  phases  at  different  periods  by 
theorists,  speculators,  and  the  unthrifty.  It  has  served 
the  purpose  of  some  persons  at  crucial  periods  to 
practise  deception  concerning  the  nature  of  money. 
It  has  been  in  the  past  and  still  is  believed  that 
money  could  be  made  out  of  anything  by  the  fiat 
of  the  government.  Some  people  have  professed  to 
think  that  much  money  in  a  country  means  general 
prosperity,  and  they  point  to  the  time  of  the  war  of 


secession  and  to  the  greenbacks  of  our  own  country, 
to  the  period  when  the  nation  was  piling  up  an  enor- 
mous war  debt,  which  the  people  have  since  been 
paying  off  through  burdensome  taxes.  They  think 
that  because  some  manufacturers  of  shoddy,  some 
sutlers,  and  some  contractors  made  their  fortunes  in 
those  days,  the  whole  country  grew  rich,  and  that  it 
was  the  cheap  greenbacks  that  blessed  us.  Many 
persons  who  are  ready  to  permit  others  to  do  their 
thinking  for  them  accept  this  as  the  truth ;  and  yet 
if  they  stop  to  think  for  themselves,  their  reason  will 
tell  them  that  a  country  cannot  grow  rich  by  main- 
taining great  armies.  Riches  are  not  gained  in  this 
way  by  those  who  stay  at  home  and  pay  out  of 
their  earnings  for  the  food,  the  shelter,  the  cloth- 
ing, the  weapons,  the  powder  and  bullets,  the  med- 
ical care,  and  for  the  transportation  of  the  thou- 
sands of  soldiers  in  the  field.  It  will  tell  them  also 
that  the  wealth  of  a  country  consists  in  what  it  pro- 
duces ;  and  therefore  if  a  hundred  thousand  citizens 
are  taken  from  the  fields  and  the  shops  to  fight  their 
neighbors,  the  aggregate  production  for  the  time 
during  which  they  are  engaged  in  international  or 
domestic  murder  will  be  less  than  it  is  when  they 
are  employed  in  the  less  glorious  arts  of  peace, 
and  therefore  the  wealth  of  the  nation  will  be  less. 
A  nation  cannot  grow  rich  by  fighting  unless  it  con- 
quers the  enemy,  and  compels  him  to  pay  not  only 
the  expenses  of  the  war,  but  a  handsome  profit  on 


them.  Bat  up  to  tins  time  no  nation  that  ever 
succeeded  in  a  war  has  received  back  anything  like 
its  awful  cost.  There  is  no  reason  to  believe  that 
any  conqueror  will  ever  be  repaid  in  wealth  or  its 
representative,  money,  for  the  expenditure  which  he 
is  forced  to  incur  to  win  his  triumph.  Reason  will 
also  tell  our  easy-going  friends  that  no  country  can 
get  rich  by  printing  pieces  of  paper  and  calling  them 
dollars. 

And  yet  the  assertion  that  the  United  States  grew 
rich  during  the  war  by  making  trade  for  the  shoddy- 
mills  and  the  sutlers  is  quite  as  worthy  of  respect  as 
many  of  the  arguments  which  are  addressed  to  Con- 
gress and  the  country  by  those  who  are  in  favor  of 
the  silver  dollar  instead  of  the  gold  dollar,  or  of 
bimetallism,  which  means  the  same  thing  as  a  sin- 
gle silver  standard,  or  of  paper  dollars  printed  by 
the  government  in  quantities  to  suit.  Whatever  is 
said  here  must  not  be  considered  as  addressed  person- 
ally to  all  who  believe  that  something  radical  ought 
to  be  done  to  reform  our  money  system.  A  good 
many  honest  people  have  been  deceived,  and  a  good 
many  intelligent  people  have  been  mystified,  by  the 
speculations  of  those  for  whose  apparently  studious 
pursuit  of  this  subject  they  have  respect.  They 
have  been  led  to  believe,  for  example,  that  there  is 
not  enough  gold  in  the  world  for  the  proper  transac- 
tion of  the  world's  business ;  that  gold  has  increased 
in  value,  become  dearer,  and  that  therefore  it  pur- 


chases  more  of  other  products  than  it  used  to.  There 
is  a  universal  outcry  about  low  prices,  and  sugges- 
tions are  made  that  if  silver  were  used  for  money  as 
well  as  gold,  money  would  be  cheaper  and  other 
products  would  be  dearer.  The  idea  has  gained 
ground  that  money  is  something  valuable  in  itself, 
something  that  men,  especially  bankers,  pursue  for 
its  own  sake,  because  they  want  to  store  it  up. 
Therefore  these  greedy  persons  have  devised  meth- 
ods, arts,  tricks — all  of  them  dishonorable  and  tyran- 
nical— by  the  practice  of  which  they  may  gather  in 
the  money  -of  the  world  and  compel  others  who 
want  it  to  pay  enormously  for  it. 

It  seems  to  me,  now  that  Congress  has  adjourned 
— the  one  Congress  of  all  the  legislative  bodies  that 
ever  met  in  Washington  which  did  most  to  becloud 
this  question — that  it  is  well  to  make  an  attempt  to 
think  back  out  of  the  maze  with  which  the  philoso- 
phers have  surrounded  money,  currency,  and  banking 
to  the  simple  principles  that  underlie  the  subject. 


II 

WHAT  is  wealth  ?  What  is  money  ?  These  are 
the  questions  which  first  present  themselves.  The 
political  economists  find  great  difficulty  in  defining 
wealth,  but  for  our  purposes  we  may  say  that  every 
material  thing  which  man  may  use  or  enjoy,  and 
which  may  be  bought  and  sold,  is  wealth.  Corn, 
cloth,  houses,  carriages  and  horses,  and  the  works 
of  art  and  literature  —  all  these  constitute  wealth. 
Money  is  the  tool  by  which  wealth  is  exchanged.  It 
is  only  a  tool  or  a  vehicle.  For  itself  merely  it  is 
not  desirable.  It  is  only  desirable  because  it  enables 
A  to  exchange  what  he  has  for  something  that  he 
desires  without  going  through  the  clumsy,  sometimes 
the  impossible,  process  of  a  barter. 

Money  is  a  vehicle.  It  carries  exchanges.  It  has 
also  been  likened  to  a  tool,  because  men  transact 
business  with  it.  Melted  down  it  may  be  sold  by 
weight,  as  coffee,  tea,  or  sugar  is  sold.  Men  collect 
coins,  it  is  true.  Some  coins  are  artistic,  while 
others  have  historical  or  antiquarian  interest;  but  a 
sovereign  or  a  dollar,  considered  as  money,  has 
merely  the  power  of  purchasing  articles  which  men 


need  or  enjoy.  A  man  might  possess  a  bank  full  of 
money,  but  he  would  go  hungry  or  naked  for  all 
that  if  there  were  no  food  or  raiment  for  him  to 
buy. 

Money  was  invented  for  men's  convenience.  All 
great  economic  truth  is  essentially  the  same  where- 
ever  it  is  applied.  The  same  laws  govern  the  small 
trading  of  the  simplest  community  and  the  large 
and  complicated  transactions  of  countries  like  the 
United  States,  Great  Britain,  France,  and  Germany. 
The  great  fundamental  truth  about  money  is  that  it 
must  not  be  doubted.  A  coined  piece  should  have 
a  definite  value,  a  universally  recognized  signifi- 
cance. When  it  does  not  mean  the  same  thing  to 
the  man  who  sells  as  to  the  man  who  buys,  it  ceases 
to  be  able  to  perform  its  function  perfectly.  In  a 
small  community  there  is  a  man  who  grows  wheat, 
another  who  rises  sheep  and  clips  them  for  their 
wool,  one  who  is  a  butcher,  one  who  makes  cloth, 
one  who  is  a  tailor.  If  barter  prevailed,  the  farmer, 
when  he  wanted  a  coat,  would  be  obliged  to  carry 
his  wheat,  after  it  was  grown,  to  the  tailor,  and  ex- 
change it  for  a  coat.  A  good  deal  of  time  and  labor 
would  be  wasted  in  this  process.  But  if  the  tailor 
happened  to  be  supplied  with  all  the  wheat  that  he 
wanted,  the  farmer  would  be  in  a  still  more  uncom- 
fortable plight.  He  would  be  obliged  to  carry  his 
wheat  from  one  neighbor  to  another,  until  he  found 
one  who  wanted  his  wheat,  and  who  had  something 


to  give  in  exchange  which  the  tailor  wanted.  Then 
he  could  procure  his  coat.  Money  does  away  with 
all  this  trouble.  It  facilitates  exchange.  With 
money  in  his  purse,  the  farmer  would  give  the 
tailor  the  price  that  he  demanded,  and  the  tailor 
would  accept  the  money  because  he  would  know 
that  at  any  time  it  would  procure  for  him,  in  whatever 
products  he  might  desire,  the  worth  of  the  coat 
which  he  had  sold  to  the  farmer.  This  is  the  first 
essential  of  money,  that  the  man  who  receives  it 
for  what  he  has  to  sell  shall  know  that  it  will  always 
and  anywhere  procure  for  him  just  as  much  value 
as  that  with  which  he  has  parted.  In  a  community 
where  all  the  people  know  and  trust  one  another 
almost  anything  might  pass  for  money.  But  when 
any  member  of  such  a  community  wanted  to  buy 
something  in  a  neighboring  village  where  he  was 
not  known,  he  would  be  obliged  to  offer  his  pro- 
ducts in  exchange,  or  money  in  which  the  person  of 
whom  he  wished  to  buy  had  confidence. 

This  is  why  money  must  have  intrinsic  value. 
There  are  various  kinds  of  money  or  currency, 
money  and  currency  being  confused  along  with  other 
things  that  go  to  make  up  the  mystery  of  finance. 
Money  is  coined  metal,  and  it  is  necessary  that  it 
shall  be  composed  of  material  that  is  valuable  in 
itself ;  that  is,  which  can  be  melted  down  and  sold 
for  other  coin  or  products  for  very  nearly  the  sum 
which  is  expressed  on  its  face,  and  that  its  value 


10 


shall  be  stable.  As  it  is  the  instrument  with  which 
exchanges  are  carried  on,  it  is  a  standard  of  value. 
It  is  that  in  which  the  farmer  expresses  the  worth 
of  his  wheat,  and  the  tailor  expresses  the  worth  of 
his  coat.  Some  modern  writers  on  finance,  whose 
books  are  circulating  just  now  in  various  parts  of 
this  country,  are  denying  this  attribute  to  money. 
But  this  is  one  of  the  paths  by  which  men  wander 
away  from  clear  reasoning  into  the  haze  of  the 
"currency  question."  It  is  sufficient  for  the  mind 
that  is  trying  to  get  at  the  truth  to  remember  that  we 
say  in  our  common  speech  that  a  bushel  of  wheat  is 
worth  a  certain  part  of  a  dollar ;  that  it  used  to  be 
worth  a  full  dollar ;  that  a  house  or  a  horse  is  worth 
so  many  dollars ;  and  that  we  can  gratify  our  desire 
for  any  article  of  merchandise  only  by  giving  for  it 
as  many  dollars  as  its  owner  believes  will  enable 
him,  in  turn,  to  procure  something  of  equal  value 
that  he  desires.  Therefore  it  is  essential  that  the 
significance  of  a  dollar  should  be  definite  and  certain. 
Moreover,  there  cannot  be  dollars  or  sovereigns  made 
from  two  metals  that  not  only  differ  in  value,  but 
one  of  which  is  frequently  changing  in  value,  so 
that  no  fixed  relationship  can  be  established  between 
the  two. 

Suppose,  for  example,  in  the  simple  community 
which  we  have  imagined,  that  a  dollar  in  gold  was 
intrinsically  worth  100  cents,  and  that  the  dollar  in 
silver  was  worth  50  cents,  both  being  legal  tenders, 


THE   SILVER   DOLLAR  UNDISGUISED 


11 


would  the  farmer  like  to  sell  a  gold  dollar's  worth 
of  wheat  for  a  silver  dollar?  Would  he  not  know 
that  his  wheat  would  thereby  be  worth  less  in  coats 
or  groceries,  or  any  other  commodities  that  he 
might  need?  But  the  tailor  would  pay  him  in 
silver,  and  he,  in  turn,  would  pay  the  person  whom 
he  owed  in  the  cheap  metal.  The  gold  would  be 
hoarded  and  sent  to  the  neighboring  village  where 
it  was  respected,  while  the  people  of  this  neighbor- 
ing village  would  scrape  together  all  the  silver  they 
could  find  in  order  to  pay  with  it  their  debts  to 
those  who  accepted  silver  as  current  money.  The  con- 
sequence is  that  silver  would  grow  cheaper  and 
cheaper,  it  would  buy  less  and  less;  finally  the  neigh- 
bors of  those  who  employed  it  as  money  would  cease 
to  trust  them,  the  payment  of  debts  would  be  de- 
manded, the  sheriff  would  be  busy  with  foreclosure 
sales,  and  commerce  and  trade  would  decline. 

Money  must  be  honest.  The  business  of  the 
world  depends  upon  the  general  recognition  that 
money  tells  the  truth  on  its  face.  And  gold  alone 
receives  that  general  recognition.  Even  silver  coun- 
tries prefer  to  receive  gold.  Some  Silver  Senators 
insist  in  their  contracts  that  they  shall  be  paid  in 
gold.  It  does  not  matter  what  ought  to  be  thought 
of  silver;  gold  is  the  only  metal  in  which  there  is 
universal  confidence. 


Ill 

METAL  money  is  the  basic  money.  There  are 
also  representatives  of  money,  for  money  has  its 
representatives,  its  agents  that  do  its  work  for  it, 
just  as  money  itself  does  the  work  for  those  who 
want  to  trade  off  the  goods  they  have  for  goods 
that  others  have.  Metal  money  is  often  inconve- 
nient. It  is  too  heavy,  for  one  thing,  to  be  used  in 
large  quantities.  When  this  is  true  it  is  open  to  all 
the  objections  that  are  made  against  barter.  It  will 
not  serve  for  currency  in  some  transactions.  By 
currency,  I  mean  money  and  its  representatives  that 
pass  from  hand  to  hand  in  daily  transactions.  Sup- 
pose, for  example,  that  A  should  purchase  property 
of  B  for  $100,000.  If  A  had  nothing  but  gold  in 
which  to  pay  B,  he  would  be  obliged  to  buy  a  wagon 
and  carry  the  price  to  B  in  this  expensive  and  trou- 
blesome manner.  If  there  were  nothing  but  gold  in 
the  world,  the  man  who  goes  into  the  central  part  of 
New  York  State  to  buy  butter  and  cheese,  or  to  the 
wheat  farms  of  the  Northwest,  would  be  obliged  to 
carry  with  him  chests  of  gold  and  an  arsenal  for  his 
protection  against  robbers,  Therefore  paper  cur- 


13 


rency  and  other  representatives  of  money  have  been 
invented.  And  this  paper  is  not  confined  to  govern- 
ment notes  and  bank-notes.  It  does  not  necessarily 
represent  gold  or  silver,  but  it  must  be  good  for 
every  dollar  that  it  promises  to  pay,  and,  more  than 
that,  it  must  be  believed  to  be  good  by  those  who 
are  asked  to  part  with  their  goods  for  it.  It  in- 
cludes promissory  notes,  drafts,  bills  of  exchange, 
and  the  checks  of  individuals.  All  these  things  pass 
from  hand  to  hand,  and  the  paper  obligations  of 
private  persons,  it  is  estimated,  furnish  the  tools 
with  which  nine-tenths  of  business  transactions  are 
carried  on.  All  these  paper  obligations  rest  on  coined 
money  or  property  of  some  other  kind.  They  pass 
in  trade  because  it  is  believed  that  they  will  be  re- 
deemed. Paper  representatives  of  money  must  be 
honest  just  as  money  itself  must  be  honest. 

I  have  said  that  money  is  for  the  convenience  of 
men.  It  not  only  does  away  with  barter,  but  it 
facilitates  and  hastens  trade  and  commerce.  Since 
money  was  introduced  men  have  been  constantly  de- 
vising methods  to  increase  its  convenience.  The 
best  paper  currency  is  that  which  is  issued  by  banks. 
It  is  best  because  it  has  a  wider  circulation,  and  is 
therefore  more  useful  and  effective  than  paper  rest- 
ing on  the  trust  or  confidence  felt  in  individuals. 
The  safety  of  the  holder  of  the  bank-bill  is  best  se- 
cured, of  course,  by  the  guarantee  of  the  govern- 
ment. This  guarantee  of  the  government  may  be 


14 


furnished  in  various  ways.  The  national  bank-note 
in  this  country  is  safe  because  there  are  in  the  hands 
of  the  government  bonds  of  the  United  States,  be- 
longing to  the  banks,  amply  sufficient  for  the  re- 
demption of  every  note.  The  difficulty  with  this 
national  bank-note  circulation  is  that  its  amount 
depends  upon  the  amount  of  the  public  debt.  The 
debt  of  this  government  has  been  paid  off  with  a 
rapidity  that  is  marvellous,  so  that  while  the  popu- 
lation and  exchanges  of  the  country  have  been  in- 
creasing, the  amount  of  bank-note  circulation  has 
been  diminishing. 

The  national  bank-notes  have  been  replaced  by 
government  paper  representing  gold  and  silver,  but 
principally  silver.  That  people  greatly  prefer  paper 
to  silver  is  illustrated  by  the  history  of  the  silver 
certificates  and  the  efforts  of  the  government  to  force 
silver  dollars  into  circulation.  In  1886,  when  there 
had  been  coined  in  silver  $233,723,286,  the  amount  of 
silver  dollars  actually  in  circulation  was  $52,668,623. 
In  1895  the  coinage  of  silver  had  increased  to  $423,- 
289,219,  the  Treasury  held  $124,479,849  in  uncoined 
silver,  and  the  amount  of  silver  in  circulation  had 
fallen  to  $51,983,162.  At  the  same  time  the  cer- 
tificates representing  silver  dollars  had  so  increased 
that  the  amount  of  silver  held  in  the  Treasury  for 
their  redemption  had  increased  from  $88,116,225 
to  $371,306,057. 

But  we  are  now  inquiring  what  money  really  is, 


15 


what  it  means,  and  what  laws  govern  it,  and  deter- 
mine its  amount  and  its  distribution.  Paper  cur- 
rency issued  by  banks,  its  origin  and  operation,  may 
be  best  illustrated  very  simply.  A  man  goes  into  a 
rural  community,  let  us  say,  where  there  is  a  general 
store.  He  knows  the  storekeeper,  who  has  confi- 
dence in  his  integrity,  or  he  has  gold  or  other  valua- 
ble security,  which  he  deposits  with  the  storekeeper. 
It  matters  not  why  the  storekeeper  trusts  him.  Con- 
fidence and  trust  are  at  the  base  of  the  great  struct- 
ure of  commerce.  When  that  departs  men  will  be 
obliged  to  carry  coin  about  with  them,  and  when 
that  time  comes  large  transactions,  such  as  are  now 
of  daily,  perhaps  hourly,  occurrence,  must  cease. 
But  no  one  who  realizes  the  deep  significance  of  the 
advance  of  civilization  believes  that  commerce  will 
cease  through  the  failure  of  men's  confidence  and 
trust  in  one  another.  The  man  whom  I  imagine  as 
going  to  the  simple  and  rural  community  desires  to 
purchase  the  products  of  the  farmers  of  the  neigh- 
borhood. He  says  to  the  storekeeper :  "  These 
farmers  do  not  know  me,  and  I  have  nothing  with 
which  to  buy  their  products.  But  they  know  you. 
They  have  confidence  in  you.  They  will  accept 
your  promises  in  payment  for  their  produce.  Give 
me  orders  on  yourself,  and  we  will  share  the  profits 
of  the  transaction." 

Upon  this  the  stranger  obtains  the  orders.     For 
the  community  in  which  he  is  carrying  on  his  trans- 


16 


action  these  orders  constitute  a  currency.  The  stran- 
ger goes  out  among  the  farmers,  and  finds,  as  he 
anticipated,  that  they  are  perfectly  willing  to  ex- 
change their  products  for  the  orders  on  the  store- 
keeper. He  ships  his  purchases  to  the  market,  and 
from  the  proceeds  of  the  sale  he  pays  the  storekeep- 
er the  amount  of  the  orders  issued  by  him  for  the 
purchase  of  the  farmers'  products.  Besides  the 
amount  of  the  orders,  he  pays  the  storekeeper  some- 
thing for  the  risk  he  has  run  and  for  the  accommo- 
dation. The  amount  that  he  pays  is  proportioned 
to  the  risk  if  he  is  the  only  applicant,  and  is  limited 
by  the  amount  or  profit  which  the  speculator  will 
probably  make  in  the  market  to  which  he  will  send 
his  purchases.  In  this  transaction  we  have  the  ope- 
rations of  a  bank  of  discount  and  of  a  bank  of  cir- 
culation. The  storekeeper  takes  a  receipt  from  the 
speculator  for  the  orders  which  he  has  given  him, 
and  this  receipt  is  in  the  nature  of  a  promissory  note, 
which  may  be  payable  on  demand  or  at  the  end  of 
a  specified  time. 

The  speculator  may  pay  the  storekeeper  in  coin. 
If  he  does  he  must  pay  the  cost  of  shipping  it  to 
him.  If  he  can  secure  paper  currency,  however,  he 
uses  that.  As  a  rule,  he  will  have  money  in  a  bank 
in  the  place  where  he  lives,  and  a  check  on  this  bank, 
especially  if  the  bank  certifies  that  the  money  to 
meet  it  is  actually  in  its  possession,  will  be  satisfac- 
tory to  the  storekeeper.  As  to  the  orders  issued 


17 


by  the  storekeeper,  they  will  come  to  him  in  due 
time,  but  he  will  not  have  to  pay  all  of  them  in 
money.  The  farmers  trade  with  him,  and  some  of 
them  are  indebted  to  him.  When  he  receives  one 
of  his  orders  from  a  debtor,  he  accepts  it  as  a  full 
or  part  payment  of  his  account,  according  to  the 
amount  of  each.  No  money  has  passed — that  is, 
no  coin  has  been  used  in  a  transaction  in  which  an 
order  is  finally  cancelled  by  a  debt  due  to  him  who 
issued  it.  The  bit  of  paper  calling  for,  let  us  say, 
$100,  was  accepted  by  the  farmer  in  return  for  his 
grain.  He  may  have  used  it  to  buy  a  horse  from 
a  neighbor,  who  also  had  confidence  in  the  store- 
keeper. That  neighbor  may  have  paid  a  debt  to 
another.  This  other  may  have  paid  interest  with 
it  on  a  mortgage  held  by  the  storekeeper.  Let  us 
suppose  that  the  storekeeper  has  issued  orders  for 
$10,000.  If  $8000  of  this  goes  to  the  persons  in 
debt  to  the  storekeeper,  or  who  want  goods  that  he 
has,  only  $2000  will  have  to  be  redeemed  in  actual 
money.  In  the  meantime,  in  the  instance  of  the 
$100  order  which  I  have  imagined,  $100  worth  of 
grain  has  purchased  a  horse,  the  horse  has  paid  a 
debt  owed  by  the  seller,  and  the  fourth  holder  has 
paid  $100  of  interest  on  his  mortgage,  and  all  of 
these  transactions,  aggregating  $400,  have  been  car- 
ried on  with  one  piece  of  paper,  and  without  the 
use  of  a  single  coined  dollar. 

From  what  we  have  seen  already,  it  is  clear  that 

2 


18 


persons  who  insist  that  hard  times  come  from  lack 
of  money  or  currency  must  prove  their  case,  for,  if 
they  are  right,  there  is  not  only  a  sufficient  supply 
of  articles  in  the  world,  but  there  is  also  a  desire  on 
the  part  of  those  who  own  those  articles  to  exchange 
with  one  another,  while  the  only  thing  that  prevents 
such  an  exchange  is  the  lack  of  an  instrument  or 
vehicle  with  which  to  effect  it ;  and  this  is  an  im- 
probable state  of  affairs. 


IV 

Ix  a  bank-note  the  banker  makes  a  promise  to  pay 
a  definite  sum  of  money  to  the  person  who  presents 
it  for  redemption.  The  general  storekeeper  is  the 
banker  in  the  case  which  I  have  imagined.  He  is- 
sued orders  on  himself,  which  were  used  as  cur- 
rency. It  is  quite  possible  that  not  one  of  such  or- 
ders would  ever  demand  the  use  of  a  single  coined 
dollar.  It  must  be  recollected  that  the  leading  ques- 
tion raised  by  those  who  are  opposed  to  a  single 
gold  standard  is  as  to  the  quantity  of  real  money. 

Let  us  assume  for  the  sake  of  illustration  that  the 
storekeeper's  $10,000  in  orders  came  finally  into  the 
possession  of  his  debtors ;  that  every  man  who  held 
one  of  them  owed  him  a  sum  of  money  equal  to  the 
face  value  of  the  order.  The  result  would  be  that, 
through  the  agency  of  the  speculator,  the  storekeeper 
would  obtain  payment  of  the  debts  due  him.  The 
farmers,  by  using  the  orders,  would  pay  their  debts 
in  grain,  in  horses,  in  old  accounts,  in  interest  money, 
in  products  of  various  kinds.  Trade  would  be  facili- 
tated by  the  use  of  this  paper.  The  speculator  him- 
self might  not  employ  any  coin  in  repaying  the  store- 


20 


keeper.  As  we  have  seen,  he  might  send  his  check 
to  the  storekeeper  to  pay  off  the  orders  he  had  ob- 
tained from  him,  and  it  might  easily  be  that  the  bank 
on  which  this  check  was  drawn  would  hold  a  note 
owing  by  the  storekeeper,  who  had  in  this  way  paid 
for  goods  which  he  had  purchased.  The  check 
would  then  be  used  by  the  storekeeper  to  pay  off 
the  note.  Or  the  check  on  the  bank  might  be  pre- 
sented to  it  through  another  bank,  on  which,  in  turn, 
the  first  bank  might  hold  a  check.  Between  these 

o 

two  banks  there  would  be  a  settlement  in  money  of 
the  difference  between  the  two  checks.  For  exam- 
ple :  If  the  check  drawn  by  the  speculator  to  the 
order  of  the  storekeeper  was  for  $10,500— the  $10,- 
000  of  orders  and  $500  half  of  the  profit  of  the 
transaction — it  might  be  sent  to  a  second  bank  for 
deposit,  or  in  payment  of  the  storekeeper's  note  for 
that  amount  or  for  a  smaller  amount.  If  the  amount 
of  the  note  were  less  than  the  check,  the  bank  would 
simply  give  the  storekeeper  credit  for  the  difference. 
Not  a  dollar  of  money  would  pass  unless  the  store- 
keeper desired  a  settlement,  and  then  he  would  re- 
ceive the  balance  due  him  in  coin,  or  in  another 
check,  or  in  bills.  The  check  on  the  first  bank 
would  not  necessarily  be  .paid  in  money  if  it  was 
presented  by  the  second  bank ;  the  first  bank  might, 
and  if  the  two  banks  were  located  in  a  city  it  proba- 
bly would,  hold  a  check  against  the  second  bank.  I 
am  now  speaking  of  single  transactions  for  the  sake  of 


21 


simplicity.  The  truth  is  that  to  fairly  represent  the 
transactions  between  two  banks  situated  in  any  con- 
siderable city,  this  single  illustration  would  have  to  be 
multiplied  by  tens,  or  hundreds,  or  thousands,  accord- 
ing to  the  size  of  the  city  and  the  volume  of  its  business. 
The  demand  on  the  first  bank  would  be  for  $10,500. 
If  the  demand  on  the  second  bank  held  by  the  first 
bank  was  equal  to  that,  there  would  be  simply  an 
offset,  and  the  accounts  between  the  two  would  be 
settled  without  the  passing  of  a  single  dollar. 

In  this  event  we  should  have  this  history  of  the 
transactions  which  began  with  the  loan  of  orders  by 
the  storekeepers  to  the  speculator:  The  speculator 
having  no  money,  borrowed  orders  drawn  by  the 
storekeeper  on  himself.  These  orders  were  promises 
to  pay.  With  these  orders  the  speculator  purchased 
products  of  the  neighboring  farmers  of  the  aggre- 
gate value  of  $10,000.  With  the  same  orders  one 
farmer  purchased  a  horse ;  another  paid  a  debt ;  a 
third  paid  interest  on  his  mortgage.  Other  farmers 
paid  rent,  repaired  their  houses,  built  barns,  bought 
cattle ;  and  finally,  all  the  orders  coming  into  the 
possession  of  debtors  of  the  storekeeper,  they  were 
employed  to  cancel  their  debts,  and  the  orders  were 
destroyed.  With  $10,000  worth  of  the  storekeeper's 
orders  transactions  involving  hundreds  of  thousands 
of  dollars  might  thus  be  carried  on,  and  all  without 
the  use  of  a  single  piece  of  real  money,  or  even  a 
single  bank-note. 


22 


On  the  other  side  of  the  transaction  we  have  this 
state  of  affairs:  The  speculator  sells  the  products 
which  he  has  bought  of  the  farmers.  In  payment 
he  receives  checks,  which  he  deposits  in  his  bank. 
Let  us  call  it  the  First  National  Bank.  These  checks 
are  orders  on  other  banks.  The  speculator  draws 
his  own  check,  which  is  an  order  on  the  First 
National  Bank,  and  sends  it  to  the  storekeeper  in 
payment  of  the  original  orders.  When  the  check  is 
received  the  storekeeper  is  finally  paid  the  debts 
owing  him  by  the  farmers.  When  the  storekeeper 
receives  the  check  he  deposits  it  in  his  local  bank, 
and  this  bank  sends  it  to  its  corresponding  bank  in 
the  city  in  which  the  First  National  Bank  is  located. 
Then  the  First  National  pays  to  this  corresponding 
bank,  the  Second,  the  difference  between  whatever 
check  is  held  by  it  which  is  an  order  on  the  Second, 
and  that  which  the  Second  holds  against  it,  which  is 
the  speculator's  check  to  the  storekeeper.  This  is 
the  first  use  of  money  or  bank-notes  in  all  these 
many  transactions. 

Not  only  has  nothing  but  paper  been  used,  but 
the  paper  has  consisted  of  promises  to  pay,  in  the 
aggregate,  $10,000  in  the  dealings  between  the  spec- 
ulator and  the  farmers,  and  $10,500  in  the  dealings 
between  the  speculator  and  the  storekeeper  through 
the  agency  of  the  banks. 

But  checks  are  not  the  only  kind  of  currency 
which  can  be  used  as  a  tool  for  the  facilitating  of 


exchange.  There  are  various  other  forms  of  credit, 
into  which  we  need  not  inquire  so  fully  as  we  have 
examined  the  procession  of  the  checks.  The  store- 
keeper may  make  a  record  of  his  claim  against  the 
speculator  in  his  books,  and  by  assigning  this  claim 
may  obtain  goods  that  he  needs ;  or  the  farmer  from 
whom  the  speculator  buys  the  grain  may  take  the 
promissory  note  of  the  speculator  and  by  endorse- 
ment may  purchase  the  horse  that  he  needs ;  and  so, 
by  endorsement  after  endorsement,  the  promissory 
note  may  act  as  the  vehicle  by  which  many  ex- 
changes are  carried  on.  Or  the  speculator  may  draw 
a  bill  against  a  merchant  in  the  city  to  whom  he 
expects  to  sell  the  grain,  and  use  the  bill  for  paying 
his  debt  to  the  storekeeper.  There  are  endless  de- 
vices by  which  men  carry  on  business  without  the 
use  of  money,  and  if  it  should  happen  that  these 
devices  were  abandoned,  the  business  of  the  world 
would  be  greatly  crippled.  Transactions  would  be- 
come cumbersome.  '  It  would  seem  almost  like  go- 
ing back  to  the  age  of  barter.  As  it  is,  real  money 
is  needed  only  for  the  settlement  of  balances,  and 
how  little  is  needed  for  that  may  be  judged  from 
the  foregoing  illustrations.  The  transactions  of  the 
Clearing  House,  New  York  City,  show  that  $5,000,- 
000  in  cash  will  clear  $100,000,000  of  transactions. 


THUS  far  we  have  examined  the  various  kinds  of 
tools  which  men  employ  for  the  carrying  on  of  busi- 
ness, and  we  have  seen  that  any  tool  is  a  good  one 
that  will  be  accepted  confidently  by  the  various  per- 
sons whose  industry  and  products  are  the  subjects 
of  exchange.  Let  us  apply  the  principle  on  a  larger 
scale.  This  country  carries  on  an  enormous  business. 
Its  foreign  commerce  in  merchandise  last  year 
amounted  to  $1,547,000,000.  Seventy-three  per  cent, 
of  our  exports  were  agricultural  products.  How  much 
money  was  employed  in  carrying  on  this  trade  ? 
The  exports  and  imports  of  gold  will  not  begin  to 
pay  for  all  this  business.  In  1894  the  total  gold 
exports  amounted  to  $76,978,061,  and  the  net  gold 
exports  to  $4,528,942.  In  1893  the  net  gold  ex- 
ports from  this  country  amounted  to  $87,506,463. 
Much  of  the  gold  that  went  from  this  country  was 
for  the  payment  of  debts  represented  by  securities 
which  the  foreign  holders  sold  because  they  were 
afraid  that  our  currency  was  about  to  deteriorate,  that 
we  were  about  to  become  a  silver  country.  It  is  evi- 
dent that  our  foreign  commerce  was  not  entirely  car- 


25 


ried  on  with  real  money,  nor  did  the  national  banks 
of  the  country  carry  on  all  their  transactions  in  such 
money.  On  October  2,  1894,  as  we  learn  from 
Secretary  Carlisle's  report,  the  national  banks  had 
loaned  $2,007,122,191.  But  the  money  of  all  kinds 
in  the  banks  amounted  to  $422,428,192  only.  In 
July,  1895,  all  the  money  in  the  United  States 
amounted  to  $2,389,000,000.  This  was  a  little  more 
than  the  sum  that  was  then  loaned  out  by  the  banks. 
But  even  this  amount  was  not  all  used  in  business. 
The  amount  in  circulation  in  July  1894,  was  $1,662,- 
000,000.  Although  the  silver  men  were  crying  out 
for  money,  the  country  was  not  using  all  the  money 
then  in  existence,  and  yet,  judging  from  the  amount 
of  loans  and  discounts  alone,  it  was  using  tools  of 
exchange  that  represented  much  more.  Moreover, 
we  had  and  continue  to  have  a  greater  amount  of 
money  per  capita  than  any  other  country  except 
France,  Portugal,  the  Netherlands,  and  Belgium. 
The  amount  of  money  in  the  United  States  was  $24.07 
per  capita,  while  Great  Britain  possessed  $19.98  per 
capita.  Our  stock  of  gold  is  the  largest  in  the  world, 
except  that  of  France.  Our  stock  of  silver  of  full 
legal  tender  is  actually  the  largest,  if  we  except  India 
and  China.  At  the  same  time  our  stock  of  uncovered 
paper  is  larger  than  that  of  any  other  country  except 
Russia  and  the  South  American  States.  For  a  long 
time  our  society  in  the  money  market  has  been 
questionable. 


The  foreign  commerce  of  the  country  is  based  on 
the  fact  that  there  are  many  thousands  of  foreign 
people  who  want  our  meat,  breadstuffs,  and  cotton, 
and  that  there  are  many  thousands  of  persons  in  this 
country  who  want  woollen  goods,  cotton  goods,  silks, 
velvets,  iron,  and  steel  ware  from  Europe,  and  sugar, 
tea,  coffee,  and  spices  from  other  parts  of  the  world. 
These  articles  are  exchanged  for  one  another.  The 
transactions,  measured  in  money,  amount  to  a  much 
greater  sum  than  the  money  itself  which  passes  be- 
tween the  two  countries.  The  balances  only  are  set- 
tled in  specie,  as  already  explained.  Whatever  grand 
balance  there  may  exist  at  the  end  of  the  year  between 
two  countries  like  Great  Britain  and  the  United  States 
does  not  depend  wholly  upon  the  commerce  that  has 
been  carried  oh  between  them,  for  Great  Britain  in- 
vests a  good  deal  of  money  in  this  country  in  securi- 
ties, in  business  concerns,  in  real  estate,  so  that  while 
what  is  called  the  "  balance  of  trade  "  may  be  in  our 
favor — that  is,  we  may  have  exported  more  goods 
than  we  have  imported — Great  Britain  may  never- 
theless still  be  our  creditor. 

Whatever  we  have  imported  in  goods  is  wealth. 
Whatever  Great  Britain  has  received  from  us  in  gold 
is  a  means  of  gaining  wealth.  Every  piece  of  cloth, 
every  suit  of  clothes,  every  mechanic's  tool,  every 
rail,  is  something  that  we  want  and  that  makes  us 
better  off.  Every  ship-load  of  grain  that  England 
receives  from  the  United  States  is  so  much  food  for 


27 


the  hungry.  Bat  if  we  sold  all  this  grain  for  gold, 
and  received  it,  what  good  would  the  gold  alone  do 
us  ?  It  is  not  a  pile  of  gold  that  brings  prosperity  ; 
it  is  the  gratification  of  our  own  and  others'  desires 
through  the  exchange  of  commodities.  The  world's 
commerce  is  the  trade  of  a  simple  community  ampli- 
fied. It  is  an  exchange  of  products,  and  such  ex- 
change is  facilitated  by  the  use  of  credit,  of  mutual 
confidence,  represented  largely  by  bankers'  bills  of 
exchange  that  do  not  depend  for  their  validity,  or 
for  the  trust  felt  in  them  by  the  mercantile  communi- 
ties on  the  two  sides  of  the  ocean,  either  on  the 
amount  of  gold  in  the  coffers  of  the  bankers,  or  on 
the  fiat  of  the  government,  or  on  any  legal-tender 
quality  bestowed  upon  them  by  law,  but  upon  the 
general  belief  in  the  willingness  and  ability  of  the 
persons  on  whom  the  bills  are  drawn  to  meet  them 
when  they  are  presented  for  payment. 

What  is  true  of  simple  trade  and  of  foreign  com- 
merce is  also  true  of  the  sale  of  a  man's  labor  for 
wages.  The  man  who  works  with  his  hands,  or  the 
professional  man  who  works  with  his  brains,  wants 
food,  raiment,  shelter,  books,  education  for  his  chil- 
dren. He  buys  all  these  things  with  his  labor.  He 
digs  in  the  field,  writes  or  paints,  argues  in  the 
courts,  or  preaches  in  the  pulpit  for  these  things. 
He  could  not  go  to  the  tailor,  or  to  the  butcher,  or 
the  grocer  to  barter  with  any  assurance  of  success, 
whenever  he  happened  to  be  in  want  of  the  several 


28 


articles  in  which  they  deal,  for  nine  times  out  of  ten 
his  services  would  not  be  wanted,  and  he  would  be 
as  badly  off  as  the  man  possessed  of  a  store  of  gold 
with  nothing  to  buy  with  it.  Therefore  he  sells  his 
services  for  money,  and  the  value  of  his  services,  the 
price  which  he  obtains  for  them,  is  not  in  the  slightest 
degree  dependent  on  the  amount  of  money  there  is 
in  the  community,  but  on  the  number  of  people  who 
can  render  services  such  as  he  has  to  sell,  and  on 
the  desire  of  other  people  for  them.  If,  for  example, 
there  were  no  disputes  requiring  settlement  by  the 
law,  a  lawyer  who  should  be  dependent  for  his  live- 
lihood on  a  community  in  which  such  a  state  of 
things  existed  would  starve  to  death,  even  if  there 
were  millions  of  idle  money  stowed  away  in  the 
local  banks. 


VI 

IT  has  been  demonstrated  that  no  nation  alone  can 
compel  gold  and  silver  to  stand  on  an  unnatural  and 
yet  equal  footing,  and  we  have  seen  that  little  coin 
is  actually  used  in  the  world's  business.  Bimetal- 
lism has  never  existed  anywhere  except  in  theory, 
and  all  the  coins  and  bullion  of  the  one  metal  on 
which  the  currency  of  any  country  has  rested  for  the 
moment  have  never  been  needed  for  the  exchanges 
of  commerce.  Neither  Congress  nor  any  other  body 
can  determine  how  much  money  is  needed.  The  de- 
mands of  business  alone  measure  the  amount  which 
ought  to  be  in  circulation. 

Mr.  Edward  Atkinson  estimates  that  our  internal 
exchanges  involve  the  expenditure  of  about  $35,000,- 
000,000.  The  exchanges  of  the  clearing-houses  in 
1894  involved  $45,000,000,000.  The  sum  paid  for 
the  transportation  of  goods  over  the  railroads  alone 
in  1893  was  more  than  $800,000,000.  We  have 
$1,662,000,000  of  gold,  silver,  and  government  and 
bank  paper  in  circulation.  If  we  add  our  foreign 
commerce  to  Mr.  Atkinson's  reasonable  estimate  of 
the  value  of  our  domestic  transactions,  we  have,  on 


30 


the  quantitative  theory,  exchanges  demanding  the 
employment  of  $36,500,000,000  of  tools,  which  is 
more  than  twenty  times  the  sum  of  money  and  cur- 
rency in  circulation.  To  sum  up  this  part  of  the 
argument,  we  have  never  had  a  coined  dollar  for  every 
outstanding  paper  representative  of  a  dollar,  and  we 
never  shall  have.  We  have  never  had  a  dollar  in 
currency  for  every  dollar  involved  in  exchanges,  and 
we  do  not  need  any  such  amount  of  money  anymore 
than  a  farmer  needs  ten  forty-bushel  wagons  because 
he  has  to  deliver  400  bushels  of  wheat.  The  quan- 
tity of  money  needed  is  best  settled  by  the  demand 
for  it. 

Exchanges  between  those  who  produce  and  those 
who  desire  their  products  have  never  been,  and  never 
will  be,  checked  by  lack  of  legal-tender  currency.  In 
the  simple  community  which  I  have  imagined  ex- 
changes were  facilitated  by  the  use  of  the  store- 
keepers' orders.  Whenever  food,  fuel,  clothes  exist, 
and  there  is  a  demand  for  them,  there  will  be  ex- 
change or  trade.  Men  will  obtain  what  they  want, 
and  the  people  who  say  that  trade  is  stopped  because 
there  is  not  enough  coined  money  to  pay  for  all  that 
is  needed  are  talking  nonsense.  In  1893  there  was 
a  currency  famine — that  is,  the  money  and  currency 
of  the  country  were  not  available  for  trade.  More- 
over, exchanges  were  checked,  because  demand  was 
pretty  generally  satisfied.  Men  were  able  to  wait 
until  doubt  and  uncertainty  should  cease,  and  there 


'61 


should  be  a  return  of  the  general  confidence,  without 
which  commerce  is  impossible.  But  the  unwilling- 
ness of  bankers  to  lend  money  was  met  by  the  in- 
vention of  devices  to  take  the  place  of  the  regular 
and  hoarded  currency  of  the  country.  Cities,  banks, 
and  private  corporations  and  firms  invented  new  forms 
of  currency,  and  exchanges  in  the  necessaries  of  life 
went  on  with  the  aid  of  these  improvised  tools.  The 
country  did  not  need  more  money,  but  it  did  need 
the  removal  of  a  certain  fear  which  kept  people  from 
desiring  to  risk  investment  of  their  cash,  and  there- 
fore left  the  cash  locked  up  and  out  of  circulation. 
That  fear  was  that  our  money  was  to  be  debased,  and 
that  our  standard  of  value  was  to  cease  to  be  that 
which  prevails  in  the  rest  of  the  civilized  world. 

Let  us  return  once  more  to  our  simple  community. 
I  have  assumed  that  the  storekeeper  issued  orders  of 
the  value  of  $10,000,  and  that  with  those  orders  the 
people  of  the  community  carried  on  the  business  of 
the  year.  The  grower  of  wheat  sold  his  product  to 
the  speculator,  and  received  his  price  in  the  orders  of 
the  storekeeper.  He  in  turn  purchased  a  horse  with 
the  orders  he  received.  The  owner  of  the  horse  paid 
a  debt.  Another  paid  the  interest  due  on  a  mort- 
gage. The  money  being  sufficient  for  the  purposes 
of  the  community,  if  the  storekeeper  had  signed  ad- 
ditional orders  he  would  have  had  his  labor  for  his 
pains.  The  orders  would  have  remained  in  his  drawer. 
If  any  more  orders  were  needed  he  would  have  been 


32 


notified  at  once  by  the  demand  for  them.  If  those 
who  received  the  orders  had  locked  them  up,  for  ex- 
ample, there  might  have  been  a  demand  for  new  or- 
ders—  not  to  supply  more  currency  than  there  was 
before,  but  to  take  the  place  of  the  orders  that,  by 
being  locked  up,  had  ceased  to  be  currency.  Bat 
money  is  never  locked  up  so  long  as  there  is  a  healthy 
desire  for  exchanges,  and  an  adequate  supply  of  goods 
to  meet  the  desire.  If,  having  paid  out  the  whole 
$10,000  in  orders,  the  speculator  should  suddenly 
find  some  wheat  of  the  existence  of  which  he  had 
not  known  before,  he  might  go  back  to  the  store- 
keeper and  procure  more  orders,  in  order  that  he 
might  purchase  it.  This  is  the  natural  way  in  which 
the  amount  of  currency  in  circulation  is  increased. 
Or  perhaps  some  other  speculator  would  borrow  or- 
ders for  the  purpose  of  buying  other  products  of  the 
farmers.  The  amount  of  the  orders  would  depend 
upon  the  exchanges  or  trades  that  could  be  made 
through  their  employment.  When  all  the  products 
of  the  neighborhood  had  been  purchased,  the  demand 
for  orders  would  cease.  Of  course  the  amount  of 
storekeepers'  orders  would  vary  from  year  to  year. 
In  one  year  the  farmer  would  raise  a  great  many 
more  bushels  of  wheat  than  in  the  others.  Then  a 
dollar  might  buy  more  wheat,  and  the  price  of  the 
whole  crop  might  not  change.  Again,  the  demand 
for  wheat  might  increase,  and  more  dollars  would  be 
required.  Two  speculators  might  compete  for  the 


crop,  and  the  price  might  thus  advance  ;  or  a  second 
farmer  might  appear  as  a  rival  and  the  price  might 
go  down,  or  the  storekeeper  himself  might  take  the 
farmer's  wheat  "  on  account,"  letting  him  have  goods 
in  the  same  way,  and  very  few  orders  would  be  need- 
ed at  all.  In  any  case,  the  storekeeper's  orders  would 
equal  the  requirements  of  the  market ;  he  would  never 
be  called  upon  to  redeem  them  all  in  coin,  no  matter 
what  might  be  the  amount  of  the  issue. 

It  follows,  too,  that  no  increase  of  his  money  or 
his  orders  would  affect  the  course  of  the  exchanges 
of  the  community  unless  the  increase  were  demand- 
ed. The  speculator  would  want  his  wheat,  the  farm- 
er would  want  that  which  would  procure  him  his 
horse,  the  owner  of  the  horse  would  want  that  which 
would  pay  his  debt,  and  so  on.  A  pile  of  money  in 
the  storekeeper's  till  would  not  increase  the  quanti- 
ty of  exchangeable  commodities  nor  the  intensity  of 
the  desire  for  them.  So  long  as  there  were  as  many 
orders  out  as  those  who  used  them  demanded,  so 
long  there  would  be  enough  currency  in  circulation. 
If  the  storekeeper  had  more  on  hand  it  would  not  be 
used.  A  farmer  would  be  as  wise  to  send  two  wag- 
ons for  one  load  of  hay  as  the  storekeeper  would  be 
if  he  signed  orders  for  two  dollars  where  only  one 
dollar  was  needed  for  the  transactions  of  the  commu- 
nity. And  yet  there  are  men  who  contend  that  if 
you  fill  the  treasury  with  gold  and  silver  you  will 
hasten  transactions  and  increase  prices.  That  is,  if 


34 


you  have  no  desire  to  carry  your  goods  to  market, 
you  will  gain  such  a  desire  by  providing  yourself 
with  some  more  carts,  or  if  no  one  needs  your  goods, 
the  additional  carts  will  create  the  need.  This  is  also 
like  saying  that  if  no  one  needs  any  carpenter-work 
done,  the  village  carpenter  can  make  work  for  him- 
self by  buying  another  chest  of  tools.  The  difficulty 
with  those  who  want  more  money  is  that  they  forget 
what  we  have  learned,  that  money  is  a  tool  to  "  even- 
up  "  trades,  and  nothing  more.  Moreover,  they  think 
that  Congressmen  know  better  than  those  who  are 
actually  engaged  in  the  work  of  carrying  on  the  busi- 
ness of  exchanging  goods  what  amount  of  money 
they  ought  to  have.  Neither  Congressmen  nor  bank- 
ers can  tell  how  much  currency  is  needed  by  a  com- 
munity. And  whoever  does  try  to  anticipate  the 
want  for  currency  is  in  danger  of  issuing  too  much, 
stimulating  speculation,  and  bringing  on  a  panic. 


YII 

THE  undue  increase  in  the  amount  of  money  in  a 
country  produces  panics  and  brings  ruin  to  business 
men.  If  the  gold  money  were  increased,  the  result 
would  be  a  waste  of  wealth.  If  the  stock  of  gold 
and  silver  were  increased,  in  addition  to  this  waste 
of  wealth  the  stock  of  coin  that  could  be  used  for 
money  would  grow  less  both  in  value  and  in  actual 
amount.  The  reason  of  this  is  that  gold  would  dis- 
appear, because  men  would  use  that  money  which  is 
cheapest.  The  wage -earner  would  be  paid  with  a 
silver  dollar,  because  his  employer  could  procure  a 
silver  dollarnvith  less  exertion  or  fewer  goods  than 
he  would  have  to  expend  to  procure  a  gold  dollar  or 
a  paper  representative  dollar  that  was  payable  in 
gold.  The  foreigner  would  send  his  silver  to  this 
country,  and  our  gold  would  go  where  it  could  find 
employment.  If,  for  example,  Mr.  Bland  had  had 
his  way  and  secured  free  coinage  of  silver,  our  metal- 
lic money  would  have  shrunk  nearly  one-half.  In 
1895  we  had  in  the  United  States,  according  to  the 
estimate  of  the  Treasury,  gold  of  the  value  of  $579,- 
420,000,  and  silver  of  full  legal-tender  value  to  the 


amount  of  $548,000,000.  If  we  had  become  a 
silver  country,  our  legal-tender  coin  would  Lave 
shrunk,  by  reason  of  the  disappearance  of  gold,  from 
$1,027,420,000  to  $548,000,000.  Not  only  would 
the  amount  of  our  coin  have  been  reduced  by  driv- 
ing gold  out  of  circulation,  but  the  purchasing  power 
of  the  uncovered  paper,  of  which,  according  to  Mr. 
Preston,  the  country  had  $475,700,000  in  1894,  would 
also  have  been  reduced.  If  a  paper  dollar  is  made 
redeemable  in  a  silver  dollar  which  will  buy  only  one 
bushel  of  wheat,  when  a  gold  dollar  will  buy  two 
bushels,  the  paper  dollar  shrinks  to  the  value  of  the 
silver  dollar  as  a  matter  of  course. 

Let  us  suppose  that  our  storekeeper  is  himself  the 
purchaser  of  the  products  of  his  neighbors,  and  that 
he  pays  for  his  purchases  in  coin.  Heretofore  he 
has  bought  about  $100,000  of  products  every  year, 
and  he  has  used  about  $20,000  in  coin,  the  rest  of 
his  payments  being  made  with  the  goods  in  his  store 
which  the  farmers  needed.  These  goods  he  has 
bought  with  checks  and  notes,  after  the  manner 
which  we  have  described.  But  now  he  secures  a 
stock  of  coin  equal  to  the  sum  involved  in  his  trans- 
actions—  $100,000.  In  order  to  do  this  he  must 
buy  the  coin.  Coin  cannot  be  had  for  nothing.  It 
is  bought  with  wealth.  The  storekeeper  buys  it 
with  the  goods  with  which  he  has  supplied  himself 
for  the  needs  of  his  neighbors.  The  community  is 
so  much  the  poorer.  It  needs  just  enough  money 


37 


to  pay  off  the  balances  that  are  left  after  all  its 
trades  of  the  year  are  consummated ;  but  the  store- 
keeper's conduct  has  made  it  impossible  for  those 
local  trades  to  be  carried  on.  The  goods  which 
constitute  his  contribution  to  the  trades  have  been 
sent  off  to  secure  his  coin,  and  so  the  farmers 
are  left  without  them — having  money,  it  is  true,  but 
money  cannot  be  eaten  or  worn  or  used  for  agri- 
cultural implements.  It  can  buy  all  these  things, 
but  too  much  of  it  causes  much  inconvenience  and 
expense.  In  order  to  procure  his  stock  of  money 
the  storekeeper  parted  with  his  goods,  and  it  was 
these  goods  that  the  farmers  really  wanted  to  buy 
through  the  sale  of  their  products.  The  money  was 
only  used  when  a  farmer  either  was  not  ready  to  buy 
the  goods  or  when  he  wanted  something  which  the 
merchant  did  not  have,  or  when  he  wanted  to  put  it 
away  for  saving  or  for  other  purposes.  As  it  is,  the 
farmers  will  be  obliged  to  travel  to  a  distant  town  to 
buy  their  goods,  and  the  expense  and  trouble  of  this 
are  what  the  storekeeper's  adoption  of  the  quantita- 
tive theory  of  money  has  cost  them.  Multiply  this 
expense  by  millions,  and  we  will  have  an  idea  of  the 
wasteful  extravagance  of  securing  too  much,  money 
or  dead  capital  for  the  whole  country. 

In  1872,  before  the  passage  of  the  act  of  1873 
which  omitted  the  silver  dollar  from  the  coinage, 
there  was  only  $25,000,000  of  coin  in  circulation, 
but  there  was  $346,000,000  in  greenbacks,  $329,- 


38 


000,000  in  national-bank  notes,  and  $31,500,000  in 
certificates.  Altogether  there  was  $738,000,000  of 
money  in  circulation,  or  about  $18.19  for  each  per- 
son in  the  country.  Then  followed  the  panic  of 
1873,  and  the  amount  of  money  kept  on  increasing, 
except  in  1876,  1877,  and  1878,  when  it  diminished. 
Silver,  it  is  asserted,  was  "  demonetized,"  but  there 
was  no  silver  in  circulation,  except  minor  coins,  in 
1872  and  1873.  After  1878  the  amount  of  money 
kept  on  increasing  in  the  country.  Prices  went  up 
and  down  without  reference  to  this  increase.  Pros- 
perity came  back  when  there  was  in  circulation 
about  $16,  and  again  when  there  was  about  $23,  for 
each  person  in  the  country,  and  hard  times  were 
upon  us  when  the  amount  in  circulation  had  grown 
to  be  nearly  $25  per  capita. 

In  1894  there  was  more  gold  in  circulation  than 
ever  before  in  the  history  of  the  country.  In  the 
panic  years,  and  those  immediately  preceding  them, 
there  were  more  silver  standard  dollars  in  circulation 
than  ever  before.  The  circulation  of  greenbacks 
fell  off,  and  that  of  national  -  bank  notes  slightly 
increased. 

All  this  teaches  that  the  amount  of  money  has 
very  little  to  do  with  panics  or  hard  times.  The 
amount  of  metallic  money  that  should  be  kept  as  a 
reserve  for  the  redemption  of  paper,  or,  in  other 
words,  the  settlement  of  balances,  is  best  judged  by 
the  experiences  of  the  bankers.  What  the  country 


39 


needs  chiefly  is  a  currency  system  that  can  respond 
to  the  demands  of  business,  as  the  system  which  I 
described  in  the  last  article  responded  to  the  dis- 
covery of  the  new  store  of  wheat,  and  to  the  increase 
of  the  desire  to  purchase  it.  This  currency  ought 
to  be  issued  by  banks,  and  there  ought  to  be  a  cer- 
tain amount  of  gold  maintained  for  a  reserve.  What 
that  amount  ought  to  be  can  be  best  determined  by 
the  peculiar  circumstances  attending  the  business  of 
each  bank.  In  any  case  it  will  be  comparatively 
little.  There  is  much  more  gold  in  the  country  to- 
day than  is  necessary  for  the  settlement  of  balances 
in  domestic  and  foreign  commerce.  The  United 
States  Treasury  tries  to  maintain  $100,000,000  of 
gold  as  a  reserve  for  the  redemption  of  its  $346,681,- 
000  of  greenbacks.  It  is  abundant,  and  little  demand 
was  ever  made  upon  it  until  the  national  credit  arid 
finances  were  doubted.  On  this  basis  the  amount  of 
gold  in  the  country  would  sustain  a  paper  currency 
of  about  $2,000,000,000,  nearly  $400,000,000  more 
than  we  now  have  as  the  total  of  all  our  gold,  silver, 
and  paper  in  circulation.  The  procuring  of  more  gold 
would  be  extravagance,  for  which  the  producers  of 
the  country  would  be  obliged  to  pay  as  the  farmers 
paid  for  the  storekeeper's  folly  in  the  case  that  I 
have  imagined.  To  add  silver  would  be  still  greater 
folly.  What  is  needed  is  the  divorce  of  government 
from  the  whole  system  of  circulation.  If  the  gov- 
ernment does  nothing  with  money  except  to  stamp 


40 


its  certificate  of  tlieir  value  upon  coins,  then  we  shall 
not  have  panics  bred  by  the  fancies  of  Congressmen 
who  think  that  the  real  money  of  the  country  ought 
to  be  increased,  when  it  is  clear  from  what  we  have 
seen  that  so  long  as  the  standard  of  value  is  certain, 
the  country  can  be  left  to  regulate  the  quantity  of 
its  currency  by  the  law  of  demand  and  supply. 

Panics  do  not  result  from  too  little  money,  but 
generally  because  an  era  of  speculation  has  resulted 
in  many  failures.  If  panics  could  be  relieved  by 
creating  more  money,  why  are  they  not  relieved  by 
using  what  exists?  In  1893  the  loans  of  the  nation- 
al banks  amounted  to  $1,843,000,000.  In  1892  they 
had  been  $2,171,000,000.  Panics  come  not  because 
men  have  no  tools  for  the  carrying  on  of  trade,  but 
because  there  is  nothing  to  trade  with,  or  because 
they  find  out  that  they  have  been  trading  too  much, 
and  then  follows  a  reaction  or  a  lack  of  confidence 
in  one  another  which  kills  credit,  the  life  of  trade. 
Our  latest  panic  was  not  only  largely  due  to  the  fear 
that  Congress  would  do  something  with  our  mone- 
tary system  that  would  disturb  trade  and  commerce 
and  injure  our  credit  as  a  people,  but  to  some  causes 
that  were  world-wide  in  their  operation,  and  to  some 
that  were  due  to  Congressional  interference  with  the 
laws  of  nature  that  govern  exchanges,  to  protective 
tariff  laws  that  hinder  and  eventually  destroy  com- 
merce. This  country  has  had  a  great  economic  de- 
bauch, the  terrible  penalty  for  which  has  been  pro- 


41 


longed  and  debilitating.  There  is  money  enough  in 
the  country.  There  is  gold  enough  for  all  the  pur- 
poses for  which  we  need  money. 

What  the  country  needs  is  peace  from  the  politi- 
cal financiers,  and  from  prophets  who  believe  that 
the  more  mowing-machines  a  farmer  owns  the  more 
hay  will  he  raise. 


VIII 

IT  is  asserted  by  the  advocates  of  the  free  coinage 
of  silver  that  what  is  known  as  the  "  demonetization  " 
of  silver  has  caused  the  general  decline  in  prices  that 
has  gone  on  for  many  years  throughout  the  world. 
There  has,  in  fact,  been  no  demonetization  of  silver. 
In  all  large  commercial  countries,  except  Great  Brit- 
ain, there  is  to-day  a  large  supply  of  silver  of  full 
legal-tender  value.  So  far  as  silver  has  been  affected 
by  the  laws,  additions  to  this  supply  have  been 
stopped.  Even  in  Great  Britain  there  is  $112,000,- 
000  of  subsidiary  silver;  in  other  words,  there  is  in 
the  United  Kingdom  very  nearly  as  much  silver  as 
paper  currency.  In  this  country,  as  we  have  seen 
from  an  examination  of  the  report  of  the  Director  of 
the  Mint,  there  is  full  legal -tender  silver  currency 
amounting  to  $548,000,000.  In  France  there  is 
$434,300,000  in  full  legal-tender  silver ;  and  in  Ger- 
many there  is  $105,000,000.  The  estimated  stock  of 
full  legal-tender  silver  in  the  whole  world  is  $3,435,- 
800,000.  Therefore  prices  have  not  gone  down  be- 
cause silver  is  not  used  as  money  of  full  purchasing 
power.  It  is  so  used.  Moreover,  in  this  country  the 
era  of  low  prices  has  come  since  silver  began  to  cir- 


43 


culate  as  legal  tender.  In  1872  there  were  no  silver 
dollars  in  circulation.  In  speaking  of  silver  I  never 
refer  to  the  subsidiary  coin,  for  it  is  mere  token  mon- 
ey used  for  purposes  of  change.  Silver  dollars  and 
certificates  began  to  circulate  in  1878.  In  that  year 
dollars  to  the  amount  of  $1,209,251  circulated,  about 
$15,000,000  being  in  the  Treasury.  Silver  certifi- 
cates of  the  value  of  $1,462,600  were  engraved  and 
printed,  but  only  $7,080  got  into  circulation.  In  1880 
the  silver  dollars  in  circulation  amounted  to  $20,110,- 
557,  and  the  silver  certificates  to  $5,789,569.  In 
1890  the  amounts  of  silver  coin  and  certificates  in 
circulation  were  respectively  $56,278,749  and  $297,- 
556,238— a  total  of  $353,834,987.  This  amount  was 
slightly  increased  in  the  following  years,  and  in  1895 
the  total  amount  of  silver  in  circulation  in  this  coun- 
try was  $374,365,741.  If  low  prices  are  dependent 
on  the  scarcity  of  silver,  it  would  follow  that  prices 
ought  to  have  risen  during  these  years.  The  fact  that 
the  prices  of  nearly  all  commodities,  including  silver, 
fell,  however,  tends  to  show  that  there  is  no  relation 
between  the  employment  of  silver  as  money  and  what 
are  known  as  the  market  values  of  commodities. 

So  far  as  silver  bullion  itself  is  concerned,  the 
laws  of  the  United  States  intended  to  increase  its 
price  have  not  had  that  effect.  The  average  price  of 
silver  bullion  in  1873  was  $1.298  a  fine  ounce,  and 
a  silver  dollar,  measured  by  the  gold  standard,  was 
worth  $1.004.  The  fall  in  price  was  not  rapid  imme- 


44 


diately  after  the  enactment  of  the  law  of  1873,  which 
was  merely  the  recognition  of  an  existing  fact — the 
non-use  of  silver  as  money.  The  decline  was  steady, 
however,  and  in  1878  Congress  undertook  to  check  it 
by  the  passage  of  a  law,  usually  called  the  Bland  law, 
which  made  it  the  duty  of  the  government  to  pur- 
chase and  coin  every  month  a  certain  number  of  sil- 
ver dollars.  The  average  price  of  silver  bullion  in 
1879  was  lower  than  the  average  price  for  1878 
had  been  by  about  3  cents  an  ounce.  There  was 
a  slight  rise  in  1880,  but  after  that  the  decline 
in  prices  was  resumed,  until  in  1890  it  was  about 
$1.05  an  ounce,  which  was  nearly  12  cents  higher 
than  the  price  of  1889.  In  1890  the  Sherman  act 
was  passed.  This  law  was  much  more  "  friendly  to 
silver"  than  the  law  of  1878  had  been,  and  a  good 
deal  was  expected  from  it  by  the  silver  men.  It  added 
immensely  to  the  government's  stock  of  silver.  The 
amount  of  silver  coin  and  bullion  in  the  Treasury  in- 
creased from  1890  to  1895  from  $346,597,273  to 
$495,785,906.  The  expense  to  the  government  also 
was  enormous.  Under  the  act  of  1878  the  govern- 
ment purchased  291,272,019  ounces,  at  a  cost  of 
$308,279,261.  Under  the  act  of  1890  it  bought  168,- 
674,683  ounces,  at  a  cost  of  $155,931,002.  At  present 
prices  this  mass  of  bullion  is  worth  about  $308,000,- 
021  — a  loss  of  about  $156,000,000.  These  great 
sums  were  paid  by  the  tax-payers  of  this  country  for 
the  purpose  of  maintaining  silver  as  a  money  metal ; 


vce  /of  <y/i/U9/c/t/. 


45 


and  what  was  the  result  ?  In  the  first  place,  the  ef- 
forts to  thus  establish  silver  created  a  doubt  as  to  our 
credit,  and  helped  to  bring  on  a  panic,  and  the  Pres- 
ident was  compelled  to  call  Congress  together  in  an 
extra  session  for  the  purpose  of  repealing  the  law  that 
was  the  source  of  so  much  trouble.  In  the  second 
place,  they  did  not  restore  prices.  Silver  itself  con- 
tinued to  fall.  In  1891  it  sold  for  about  99  cents 
an  ounce  ;  1892,  for  87  cents  ;  in  1893,  for  78  cents  ; 
in  1894  the  price  fell  below  60  cents;  and  now  its 
price  is  about  67  cents. 

The  effect  of  these  experiments  with  silver  shows 
conclusively  that  the  amount  of  money  in  the  country 
has  no  influence  on  prices.  We  have  seen  how  the 
total  amount  of  all  kinds  of  currency  has  increased, 
and  also  the  increase  in  the  amount  of  silver  alone, 
both  in  circulation  and  in  the  Treasury,  since  1873. 
Notwithstanding  this  increase  in  the  amount  of  mon- 
ey, prices  have  gone  down.  Middling  cotton  brought 
20  cants  in  1873  ;  it  brought  6T9^  cents  in  1894 ;  it 
fell  to  5T9^-  cents  in  February,  1895,  and  is  now  back  to 
6-|  cents.  Sheetings  have  been  reduced  from  13  cents 
to  5  cents  a  yard,  standard  prints,  from  11  to  5  cents; 
wool,  from  prices  ranging  from  47  to  70  cents  to 
prices  ranging  from  19  to  23  cents,  according  to 
quality  and  season.  Prices  were  not  increased  by  in- 
crease of  money,  nor  by  the  passage  of  laws  friendly 
to  silver.  The  act  of  1878  did  not  check  the  decline, 
while  the  act  of  1890,  if  it  produced  any  effect,  must 


46 


have  expedited  it,  for  prices  fell  all  the  faster  after 
the  passage  of  that  law.  Wheat  and  corn  rose  a 
little  after  1878  until  1882,  but  their  prices  fell  in 
1883,  without  any  connection  with  silver  legislation, 
or  even  with  the  price  of  silver,  for  silver  continued 
to  decline  while  wheat  and  corn  were  rising,  as  the 
following  table  will  show  : 

Silver  per  ounce.  Wheat  per  bushel.  Corn  per  bushel. 

1879 $1.123  $1.212  49.8  cents. 

1880 1.145  1.270  55.1     " 

1881 1.138  1.318  63.1     " 

1882 1.136  1.278  80.1     " 

It  will  be  seen  from  this  table  that  even  the  prices 
of  corn  and  wheat  are  not  interdependent. 

In  extending  our  inquiry  into  the  relation  between 
the  amount  of  money  in  existence  and  the  prices  of 
commodities,  recent  statistics  published  by  recognized 
authorities  are  of  great  value.  The  silver  agitators 
are  complaining  of  low  prices,  and  holding  that  dear 
food,  clothing,  and  house  rent  indicate  prosperity. 
How  different  is  this  proposition  from  that  usually 
advanced  ?  It  is  wholly  opposed  to  the  position  held 
by  the  protectionists,  who  insisted  that  their  tariff 
had  not  increased  prices,  but  had  reduced  the  cost 
of  the  necessaries  of  life  by  increasing  competition. 
In  the  tariff  discussion  both  sides  were  in  favor  of 
cheap  food,  clothes,  tools,  and  houses.  But  when  the 
same  men  talk  in  favor  of  the  free  coinage  of  silver, 


47 


they  are  against  cheapness  and  in  favor  of  high 
prices.  It  would  seem  as  though  the  whole  discus- 
sion were  a  hollow  mockery. 

»  Mr.  Edward  Atkinson  has  recently  presented  in  the 
Forum  the  truth  about  prices  as  they  are  shown  by 
the  statistics  gathered  by  Augustus  Sauerbeck,  by 
Labor -Commissioner  Wright,  computed  and  com- 
pared by  Professor  Falkner,  of  Johns  Hopkins  Uni- 
versity, on  the  assumption  that  prices  were  at  par  in 
1860.  In  that  year  a  silver  dollar  was  worth  more 
than  a  gold  dollar  under  our  laws.  Compared  with 
the  price  in  1860  (100),  silver  was  95.3  in  1845,  97.3 
in  1850,  and  100  in  1855.  In  the  same  years  meat 
had  risen  from  79.4  in  1845  to  104.7  in  1855.  Other 
food  had  risen  from  82.8  to  114.5.  Clothes  had 
grown  cheaper.  While  the  gold  price  of  silver  was 
increasing  4.7  points,  the  price  of  meat  increased  25.3 
points  ;  other  food,  31.7  points  ;  that  of  clothes  fell 
2.4  points ;  and  the  average  of  all  prices  had  in- 
creased 10.3  points.  In  the  mean  time  wages  in- 
creased 11.2  points.  So  while  the  price  of  silver  was 
going  up,  the  prices  of  other  commodities  went  up 
faster,  and  the  purchasing  power  of  wages  became 
greater. 

The  price  of  silver  began  to  fall  about  1866,  and 
it  has  kept  on  falling  ever  since.  In  1870,  three 
years  before  the  demonetization  "  crime,"  it  had 
fallen  1.8  below  the  100  standard  of  1860.  But 
every  other  commodity  had  advanced.  Meat  was 


48 


174.3  when  silver  was  98.2;  other  food  was  146.3; 
clothes  were  139.4  ;  while  wages  were  162.2.  There- 
fore at  this  time,  at  all  events,  the  prices  of  food,  of 
clothes,  and  of  labor  did  not  fall  with  the  price  e>f 
silver.  There  was  no  silver  in  circulation,  and  the 
changes  in  its  price  had  not  affected  the  general 
market.  Then  as  now,  also,  the  purchasing  power 
of  wages  was  increasing.  Not  a  necessary  of  life 
was  so  cheap  in  this  country  in  1870  as  it  had  been 
in  1860,  but  the  labor  that  could  have  purchased  $66 
worth  of  goods  in  1865  purchased  more  than  $114 
worth  in  1870. 

Silver  continued  to  fall.  In  1875  it  was  92.2,  com- 
pared with  the  scale  of  100  in  1860.  At  the  same 
time  all  other  prices  had  gone  down,  and  they  have  con- 
tinued to  go  down,  until  within  the  last  few  months, 
when  they  are  rising  again.  But  it  is  to  be  noticed 
that  while  the  cost  of  commodities  decreased,  the 
purchasing  power  of  wages  increased,  until  it  had 
risen  from  114.1  in  1870  to  172.1  in  1890. 

The  fall  in  prices  has  not  been  confined  to  this 
country.  It  has  taken  place  in  Great  Britain  as  well. 
It  is  due  to  better  and  cheaper  methods  of  produc- 
tion and  transportation.  The  tendency  of  prices  has 
been  the  same  in  gold  and  in  silver  countries.  The 
amount  of  money  has  had  no  influence  upon  it, 
but  modern  progress  is  accountable  for  most  of 
the  decline,  and  so-called  overproduction  for  some  of 
it.  How  much  the  inventions  of  cheaper  and  better 


49 


methods  of  production  have  accomplished  in  bring- 
ing about  a  reduction  of  prices  is  shown  by  the  de- 
cline in  the  cost  of  metals  and  implements  to  the 
producer,  to  effecting  which  the  inventive  genius  of 
the  world,  and  especially  of  this  country,  has  chiefly 
directed  itself.  Representing  the  gold  price  of  met- 
als and  implements  in  1860  by  100,  in  1870  it  was 
127.8  in  paper,  and  in  1890  it  was  74.9  in  gold.  In 
England,  at  the  same  time,  the  price  fell  from  100  to 
87.4.  The  causes  that  bring  about  reductions  in 
price  are  shown  by  these  statistics  of  production  :  In 
1860,  less  than  7,000,000  tons  of  iron  were  produced 
in  the  world.  In  1892  the  production  of  iron  had 
increased  to  26,000,000  tons,  the  United  States  alone 
producing  9,157,000  tons.  What  wonder  that  iron 
is  cheaper  than  it  was  ?  Silver  has  grown  cheaper 
for  the  same  general  reason  that  has  governed  the 
price  of  iron.  In  1873  the  world  produced  63,267,- 
000  ounces  of  silver.  It  was  worth  $82,120,000.  If 
it  had  been  coined  it  would  have  made  only  $81,800,- 
000.  In  1893,  the  world's  product  of  silver  was 
161,776,100,  and  it  was  worth  $126,185,300.  But 
if  it  had  been  coined  it  would  have  made  $209,165.- 
000.  Can  any  one  imagine  a  greater  swindle  than 
such  a  creation  of  false  values  would  have  been  ? 
Iron  that  was  worth  $100  in  1860  could  be  bought 
for  $75  in  1890.  Suppose  that  the  law  had  com- 
pelled every  farmer  to  pay  for  the  iron  in  his  agri- 
cultural implements  at  the  price  prevailing  in  1860? 


50 


Would  there  not  have  been  a  revolution?  Why 
should  the  laws  treat  the  silver-miners  any  better 
than  they  treat  the  iron-miners  ? 

In  1874  this  country  produced  850,148,500  bush- 
els of  corn;  in  1893  it  produced  1,619,496,131 
bushels.  In  1874  we  produced  308,102,700  bushels 
of  wheat;  in  1893  we  produced  396,131,725  bushels. 
In  1875  we  produced  3,827,845  bales  of  cotton;  in 
1894  we  produced  7,549,817  bales.  These  are  potent 
reasons  why  corn,  wheat,  and  cotton  are  cheaper. 
Another  reason  is  that  transportation  charges  are 
cheaper.  In  1875  the  freight  charge  on  a  bushel  of 
wheat  sent  by  lake  and  canal  from  Chicago  to  New 
York  was  about  11^  cents;  in  1894  it  was  less  than 
4£  cents.  If  sent  by  rail  the  charge  in  1875  was  24 
cents;  in  1894  it  was  about  13  cents. 

.  Perhaps  the  most  striking  contribution  to  this  dis- 
cussion of  the  relations  between  the  employment  of 
silver  as  money  and  prices  has  been  made  by  Mr. 
Upton,  formerly  Assistant  Secretary  of  the  Treasury. 
He  makes  his  compilation  from  the  report  of  a  com- 
mittee consisting  of  Senators  Aldrich,  Allison,  His- 
cock,  Jones  (Nevada),  Harris,  and  Carlisle.  The  com- 
mittee computed  the  average  prices  of  nine  principal 
agricultural  articles — barley,  corn,  cotton,  hemp,  oats, 
meats,  rye,  tobacco,  and  wheat.  It  was  found  that  in 
1860,  when  the  average  price  of  these  nine  articles 
was  100,  the  price  of  the  bullion  in  a  silver  dollar 
was  104.6.  In  1870  the  price  of  the  nine  agricult- 


51 


ural  products  had  risen  to  107.7,  but  the  price  of 
the  silver  dollar  had  fallen  to  102.3.  In  1875  silver 
fell  still  further,  to  92.2,  but  the  price  of  the  agricult- 
ural products  increased  to  116.8.  In  1891  the  price 
of  silver  had  fallen  30.5  points,  and  the  average  price 
of  the  other  commodities  1.6  points. 

So  we  see  that  while  silver  has  been  going  down, 
the  prices  of  all  other  products  have  also  gone  down, 
but  not  so  steadily  nor  so  much  as  that  of  silver,  and 
that  at  times  when  silver  fell  the  prices  of  other  arti- 
cles rose.  We  have  also  seen  that  prices  of  agricult- 
ural products  rose  after  the  so-called  demonetization 
of  silver,  although  the  price  of  silver  fell.  The  price 
of  silver  continued  to  fall  after  the  acts  of  1878  and 
1890,  which  were  passed  to  advance  it.  On  the  other 
hand,  the  average  price  of  the  nine  articles  already 
mentioned  fell  from  116.8  to  102.9  after  the  act  of 
1878,  and  rose  from  87.9  to  98.4  after  the  act  of 
1890. 

Still  further  evidence  that  prices  are  not  affected 
by  the  amount  of  money  in  the  country  is  furnished 
by  the  commercial  and  financial  history  of  the  present 
year. 

There  is  much  evidence  in  the  recent  history  of 
the  country  that  while  the  amount  of  money  in  cir- 
culation, or  in  existence,  has  little  to  do  with  prices, 
and  that  trade  and  commerce  are  only  temporarily 
checked  by  lack  of  currency,  the  character  of  our 
currency  has  a  strong  influence  upon  our  prosperity. 


We  know,  for  example,  that  the  mad  speculation  in- 
spired by  the  cheapness  of  our  paper  currency  led 
directly  to  the  disastrous  and  distressing  panic  of 
1873,  and  that  to  the  apprehension  felt  by  the  hold- 
ers of  our  securities  was  largely  due  the  panic  of 
1893.  In  1878  the  country  was  on  a  gold  basis. 
Prices  had  begun  to  fall  about  1865;  and  that  de- 
cline was  not  due,  of  course,  to  any  war  on  silver, 
or  to  any  currency  legislation  whatever.  In  1877 
there  was  slightly  less  money  in  the  country  than 
there  had  been  before,  in  consequence  of  the  re- 
demption of  greenbacks.  In  1878,  however,  the 
amount  of  money  began  to  increase.  In  1879 
there  was  in  existence  in  money  and  legalized  sub- 
stitutes for  money  $5  more  for  each  person  in  the 
country  than  there  had  been  in  1878;  but  only 
$1.43  of  this  increase  got  into  circulation.  The 
government  (in  other  words,  the  tax-payers)  had 
paid  the  expense  of  creating  $5  in  currency  for 
every  $1.43  demanded  by  the  business  interests.  In 
1894  the  amount  of  money  in  the  country  was 
about  $19  per  capita  more  than  it  was  in  1877 — 
that  is,  it  had  a  good  deal  more  than  doubled.  But 
the  business  of  the  country  at  the  end  of  those  six- 
teen years,  as  shown  by  its  demand  for  currency, 
needed  only  $9  per  capita  more  than  was  required 
by  it  in  1877.  In  that  period  there  had  been 
created  money  and  currency  to  the  amount  of  $1,- 
657,000,000,  in  addition  to  that  which  existed  at 


^^Z 


A 


\ 


V 


53 


the  beginning  of  the  period,  to  meet  an  increased 
demand  for  $937,494,000.  And  this  enormous  in- 
crease of  money  and  currency,  wasteful  and  extrav- 
gant  as  it  was,  costing  the  tax- payers  enormous 
sums  of  money,  did  not  check  the  fall  of  prices, 
which  was  due  to  the  lower  cost  of  production  and 
distribution,  the  result  of  the  wonderful  inventive 
genius,  enterprise,  and  energy  of  the  age. 

What  was  the  effect,  however,  of  the  resumption 
of  specie  payments — the  mere  declaration  that  the 
co-nntry  was  on  a  gold  basis,  and  would  redeem  its 
promissory  notes  in  coin  of  the  legal  standard? 
Let  us  examine  the  prices  prevailing  in  two  periods. 
One  period  is  from  1878  to  1890,  when  the  Sher- 
man law  was  passed  for  the  purpose  of  compelling 
the  government  to  buy  substantially  the  whole  prod- 
uct of  American  silver-mines,  and  to  add  its  fictitious 
value  to  the  currency  of  the  country.  The  other 
is  the  period  immediately  after  the  passage  of  that 
law. 


FIRST    PERIOD. 

SECOND    PERIOD. 

1878. 

1890. 

1890. 

1894. 

Articles. 

Prices. 

Prices. 

Articles.                  Prices. 

Prices. 

Cents. 

Cents. 

Cents. 

Cents. 

Middling  cotton  

11.22 

11.07 

Middling  cotton  11.07 

6.94 

Standard  sheetings. 

.     7.8 

7.0 

Standard  sheetings.  7.0 

5.11 

Shirtings  

11. 

10.9 

Shirtings  10.9 

9.5 

Print  cloths  

3  44 

3.34 

Print  Cloths  3.34 

2.75 

Wheat  

.118.8 

98.3 

Wheat  98.3 

61.1 

Corn  

51.4 

48.1 

Corn  48.1 

50.9 

It  is  clear  from  these  two  tables  that  prices  were 
steadier  when  there  was  no  question  as  to  the  value 
of  our  money 7  when  the  irredeemable  paper  had 


54 


been  converted  into  a  gold  note.  Even  the  attempt 
to  depreciate  the  currency  through  the  silver  act  of 
1878  did  not  disturb  the  markets.  The  reason  is 
that  the  country  was  rich  enough  to  pay  the  cost  of 
adding  millions  of  silver  dollars  each  year  to  the 
amount  in  the  Treasury  without  suffering  disas- 
trous consequences,  and  silver  did  not  enter  into  the 
circulation,  either  in  the  form  of  coined  dollars  or 
certificates,  before  1888.  In  that  year  the  amount  of 
silver  certificates  out  was  $200,760,000,  while  silver 
dollars  amounting  to  $55,527,000  were  in  circulation. 
Since  then  the  amount  of  silver  certificates  in  cir- 
culation has  increased  to  $319,700,000,  while  the 
amount  of  silver  dollars  that  are  out  has  fallen  to 
$52,000,000. 

It  is  hardly  worth  while  to  furnish  other  facts  and 
statistics  to  prove  that  prices  of  commodities  do 
not  depend  on  the  quantity  of  money  in  existence. 
I  have  shown  that  the  rise  and  fall  of  prices  have 
not  depended  on  the  quantity  of  money ;  that  the 
quantity  of  money  has  been  actually  increased  and  yet 
prices  have  gone  down ;  that  silver  has  fallen  while 
prices  of  other  commodities  have  risen ;  that  laws 
have  been  passed  to  increase  the  value  of  silver  and  to 
advance  other  prices  without  accomplishing  either  ob- 
ject ;  that  prices  have  been  steadier  when  the  country 
was  frankly  on  a  gold  basis  than  when  it  was  encour- 
aging the  employment  of  silver  as  legal-tender  money  ; 
and  that  the  effort  to  maintain  silver  has  much  more 


55 


than  doubled  the  quantity  of  money  in  the  country, 
has  added  to  the  currency  nearly  twice  as  much 
money  as  the  increased  business  of  the  country 
has  absorbed,  and  all  this,  of  course,  at  an  enormous 
cost  to  the  tax-payers. 

Prices  are  determined  by  demand  and  supply.  To 
go  back  to  our  simple  community,  if  the  wheat- 
grower  has  a  bad  year  and  raises  only  half  the  usual 
crop  of  grain,  his  crop  will  be  worth  twice  as  much  per 
bushel  in  horses,  corn,  clothes,  as  in  a  full  crop  year. 
He  will  get  twice  as  many  dollars  per  bushel,  other 
things  being  equal,  as  he  usually  receives.  Each 
bushel  of  wheat  will  buy  twice  as  much  as  a  bushel 
brought  last  year.  But  the  whole  crop  will  not 
buy  any  more  than  the  whole  of  the  larger  and 
cheaper  crop  brought.  If  there  is  a  falling  off  in 
other  crops,  or  if  clothes  and  other  merchandise  in 
the  storekeeper's  stock  are  dearer  in  consequence  of 
an  increased  demand  or  an  increase  in  the  cost  of 
production  or  transportation,  the  farmer's  bad  crops 
will  bring  less  to  him  in  what  he  needs — that  is,  in 
what  he  uses  his  money  to  procure — although  he 
receives  actually  more  money.  If  the  storekeeper's 
goods  advance  in  price  he  will  receive  more  money, 
but  that  money  will  buy  less  of  the  produce  of  the 
farmer.  What  has  really  happened  throughout  the 
world  has  been  already  indicated,  and  that  has  hap- 
pened especially  in  this  country,  which  is  so  amply 
blessed  in  material  wealth  that  it  prospers  in  spite 


56 


of  the  follies  and  ignorance  of  those  who  makes  its 
laws,  and  who  tamper  with  its  economic  and  mone- 
tary systems  with  a  hardy  recklessness  that  is  born 
of  ignorance  of  the  fact  that  exchange  is  governed 
by  the  laws  of  nature,  which  cannot  be  successfully 
opposed  by  those  of  man.  The  necessaries  of  life 
have  been  growing  cheaper  while  it  has  been  growing 
easier  to  earn  them.  Even  now,  when  prices  are  going 
up,  when  the  iron-mills  find  it  difficult  to  keep  up  with 
the  orders  that  are  pouring  in  upon  them,  wages  have 
been  advanced  in  the  manufacturing  establishments 
of  the  country — in  the  cotton  and  woollen  mills  of 
New  England  and  the  iron  and  steel  mills  of  Penn- 
sylvania. 


IX 

IT  was  a  free-coinage  advocate  who  invented  the 
theory  that  cheap  necessaries  of  life  are  curses.  Un- 
til this  curious  doctrine  was  promulagated,  it  had 
been  supposed  that  cheap  bread  meant  prosperity — 
that  the  only  price  that  rose  with  the  coming  of  bet- 
ter times  was  the  price  of  labor.  And  now  when  we 
have  the  conditions  that  make  for  prosperity  we  hear 
that  the  world  has  been  mistaken,  and  that  the  wage- 
earner  will  be  the  happier  when  his  food  and  tools 
cost  him  more  ;  that  the  farmer  will  once  more  smile 
when  he  pays  war  prices  for  his  clothes,  his  lumber, 
and  his  agricultural  implements.  As  to  the  farmer, 
he  should  bear  in  mind  that  while  the  prices  of  some 
of  his  products  have  decreased,  the  prices  of  others 
have  risen  since  1873 ;  that  pig-iron,  which  is  the  chief 
material  of  his  reaper  and  other  implements,  sells  for 
about  $13  a  ton,  although  in  1873  it  sold  for  about 
$43;  that  steel  rails  have  fallen  from  $120  to  $24  a 
ton ;  that  the  freight  charges  on  his  products  are 
less,  as  I  have  already  shown,  by  at  least  50  per  cent. ; 
that  while  the  price  of  his  wheat  has  been  reduced 
about  50  per  cent.,  the  price  of  his  corn  has  risen  ; 


58 


and  that  the  price  of  rtiess  pork  is  about  the  same 
as  it  was  twenty  years  ago,  while  he  pays  about 
60  per  cent,  less  for  the  cottons  that  he  wears  and 
uses  in  his  house,  about  66  per  cent,  less  for  his  sug- 
ar, more  than  80  per  cent,  less  for  his  illuminating 
oil,  and  that  his  clothes  and  shoes  do  not  cost  more 
than  a  third  of  what  he  paid  twenty  years  ago. 

There  is  only  one  class  that  would  apparently  be 
benefited  by  cheap  money  and  dear  goods,  and  that 
is  what  is  called  the  "  debtor  class,"  but  the  debtor 
who  fancies  that  he  is  to  be  ultimately  benefited  in 
this  dishonest  way  is  grievously  mistaken.  Accord- 
ing to  the  census  report  of  1890,  the  number  of 
mortgaged  farms  in  the  country  was  one  in  five.  In 
the  South  the  number  was  between  two  and  three  per 
cent.  The  mortgage  indebtedness  in  the  Northwest 
was  for  lands  and  improvements.  The  greater  part  of 
this  indebtedness  was  owing  in  the  Northwest,  where 
land  has  risen  in  value,  this  increase  alone  being  far  be- 
yond the  amount  of  the  mortgage  indebtedness.  Are 
we  to  change  our  currency  system,  and  to  establish  a 
fluctuating  and  dangerous  currency  which  will  bring 
disaster,  the  mere  threat  of  which  has  already  pro- 
duced a  panic  from  which  we  have  not  yet  recovered, 
in  order  that  the  owners  of  these  valuable  farms  may 
pay  their  creditors  less  purchasing  power  than  they 
borrowed  ?  It  would  be  like  this  :  Thirty  years  ago 
a  pioneer  borrowed  $2500,  and  with  it  bought  and 
improved  a  hundred  acres  of  land  in  Wisconsin. 


59 


His  land  and  buildings  are  now  within  a  short  dis- 
tance of  a  thriving  town,  and  are  worth  $20,000.  He 
still  owes  the  money  that  he  borrowed,  preferring  to 
pay  7  or  even  10  per  cent,  interest  for  money  on 
which  he  can  make  a  profit  of  from  15  to  25  per  cent. 
Or  it  may  be  that  with  all  his  prosperity,  and  not- 
withstanding the  growing  value  of  his  lands,  he  is 
not  often  in  command  of  ready  cash,  or  he  may  be 
extravagant.  Whatever  the  reason  may  be,  he  is 
still  in  debt,  and  he  wants  cheap  money  with  which 
to  pay  his  creditor.  He  wants  to  drive  gold  out  of 
circulation,  to  introduce  silver  through  free  coinage, 
two  dollars  of  which  will  purchase  only  as  much  of 
his  products  as  could  be  bought  by  one  of  the  dollars 
that  he  borrowed.  At  present  prices  he  owes  the 
man  who  has  enabled  him  to  make  $20,000,  less  the 
$2500  of  capital  that  he  lent  him,  the  equivalent  of 
about  4000  bushels  of  wheat,  and  he  wants  the  mon- 
ey system  changed  so  that  he  can  pay  with  about 
2000  bushels.  It  is  hardly  probable  that  the  four 
farmers  out  of  every  five  who  owe  nothing  will  con- 
sent to  incur  the  perils  of  free  coinage  of  silver  in 
order  to  permit  the  one  debtor  to  pay  2000  bushels 
of  wheat  where  4000  are  honestly  due.  Nor  is  it 
probable  that  many  of  the  debtors  themselves  will 
ask  such  a  dishonest  favor  when  they  come  fully  to 
understand  the  real  nature  of  their  request. 

But  the  silver  men  say  that  the  cheaper  money  will 
benefit  those  who  are  paying  their  debts  every  year — 


60 


not  mortgage  debtors  only.  How  many  of  the  com- 
munity do  these  debtors  number?  One  would  sup- 
pose that  the  majority  of  the  people  of  this  country 
were  in  debt  to  the  minority  and  to  foreigners,  who 
ought  to  be  thankful  if  they  are  swindled  by  our  free 
and  independent  debtors.  As  a  matter  of  fact,  out 
of  annual  payments  and  receipts  made  and  acknowl- 
edged in  the  business  of  this  country,  amounting  to 
about  $50,000,000,000,  only  about  $1,500,000,000, 
or  3  per  cent.,  is  paid  and  received  in  settlement  of 
debts,  so  that  we  are  asked  to  debase  our  currency, 
to  make  our  money  cheap,  to  increase  the  burdens  of 
the  producers,  the  wage-earners,  the  merchants,  and 
the  professional  men,  to  incur  the  terrors  and  disas- 
ters of  a  fluctuating  medium  of  exchange,  and  to  add 
greatly  to  the  dangers  of  trades  and  exchanges  involv- 
ing $50,000,000,000  in  order  that  persons  owing 
$1,500,000,000  may  pay  in  fewer  goods  or  effects 
than  they  owe. 

So  much  for  the  debtor  argument,  or  rather  out- 
cry. It  is  a  dishonest  argument,  and  is  very  proper- 
ly supported  by  a  dishonest  pretence  that  most  of 
the  country  is  on  the  verge  of  bankruptcy,  and  that 
the  government  should  save  the  great  majority  of  the 
people  from  the  oppression  of  those  who  demand 
just  payment  of  that  which  is  their  due.  Such  an 
outcry  would  have  produced  very  little  effect  on  the 
minds  of  the  American  people  if  it  had  not  been  com- 
plicated with  false  pretences  as  to  the  causes  of  low 


HIGH-TONED,  HIGH-STRUNG  U.  S.  (TO  DIOGENES).  "  ANY  INSINUA- 
TION ?  YOU  GOLD  BUG  !  YOU  SHYLOCK  !  YOU  BLOATED  BOND- 
HOLDER !  YOU  CAPITALIST  !  YOU  ARE  PURCHASKD  BY  WALL- 


STREET    SHARKS." 


61 


prices  and  as  to  the  pretended  conflict  of  interests 
between  the  different  sections  of  the  country.  There 
is  no  such  conflict.  The  interests  of  all  sections  of 
the  country  are  the  same.  The  man  who  lends  money 
is  deeply  and  selfishly  interested  in  the  prosperity  of 
the  man  who  borrows.  He  desires  him  to  make  mon- 
ey in  order  that  he  may  pay  his  interest  and  debt. 
One  word  more  concerning  mortgage  debtors.  Much 
the  larger  part  of  this  debt  is  now  overdue.  The 
amount  of  the  mortgage  debts  in  this  country  is 
about  $6,000,000,000,  and  of  this  payment  of  at 
least  $4,000,000,000  could  be  demanded  to-morrow. 
Suppose  that  free  coinage  of  silver  were  adopted, 
and  gold  were  driven  out  of  circulation.  Silver  would 
pass  then  at  its  real  worth,  and  as  it  has  been  contin- 
uously depreciating  for  a  long  time,  the  mortgage 
creditors  .would  greatly  fear  its  still  further  depreci- 
ation. The  result  would  be  that  a  large  part  of  these 
mortgages  would  be  foreclosed  at  once.  Has  the 
"  debtor  class  "  taken  this  into  account  ? 


THE  notion  that  low  prices  have  been  compelled 
by  the  alleged  "  demonetization  "  of  silver  in  1873, 
and  that  they  have  caused  general  distress,  has  been 
sufficiently  answered.  Low  prices  have  not  resulted 
from  a  disuse  of  silver  as  money,  for  there  has  been 
an  increase  in  the  amount  of  silver  money  since  1873  ; 
nor  from  a  decrease  of  the  quantity  of  money  in  ex- 
istence and  in  circulation,  for  there  has  been  an  in- 
crease of  that.  They  are  due  to  other  causes,  which 
have  been  explained,  and  they  have  aided  instead  of 
retarded  the  welfare  of  the  people.  A  bushel  of 
grain  buys  more  than  it  bought  twenty  years  ago, 
and  a  day's  work  buys  much  more  than  it  purchased 
when  the  pretended  "  crime  against  silver  "  was  com- 
mitted. 

It  remains  to  examine  some  further  evidences  of 
the  country's  prosperity  during  the  last  twenty  years. 
Not  only  can  a  day  of  effort  obtain  more  of  the  nec- 
essaries and  luxuries  of  life,  but  the  public  burdens 
have  been  decreased  and  consumption  has  increased, 
while  if  there  has  been  a  slight  increase  in  taxes,  it 
is  because  of  the  expenditures  of  local  governments, 


63 


for  which  the  people  themselves  are  responsible. 
Local  taxes  may  represent  increased  prosperity.  The 
community  may  add  to  their  common  expenditure 
because  they  feel  better  able  to  pay  for  permanent 
improvements  or  communal  luxuries.  Taxes  may, 
and  dften  do,  grow  by  reason  of  the  carelessness  or 
corruption  of  local  authorities,  but  if  the  people  of 
any  community  do  not  desire  to  be  burdened  by  the 
ignorance  or  corruption  of  their  servants,  they  have 
the  remedy  in  their  own  hands. 

The  signs  of  the  increased  wealth  and  prosperity 
of  the  people  of  the  United  States  since  1873  are 
abundant.  The  people  of  this  country,  as  a  whole, 
have  not  been  distressed  either  by  the  currency  act 
of  1873  or  by  any  other  cause.  Here  and  there  in- 
dividuals or  classes  may  have  suffered  by  over  or 
extravagant  production,  or  by  the  growth  of  competi- 
tion in  special  industries  and  in  foreign  countries. 
Great  distress  and  disturbance  have  been  wrought 
by  the  acts  of  1878  and  1890,  which  were  intended 
to  "  rehabilitate  silver."  But  during  the  period  from 
1873  to  1894  the  people  reduced  the  interest-bear- 
ing public  debt  from  $1,710,483,950  to  $635,041,- 
890,  thereby  saving  nearly  $73,000,000  a  year  in  in- 
terest alone.  The  result  of  the  silver  act  of  1878 
was  to  immediately  increase  the  debt  by  about 
$83,000,000,  and  the  annual  interest  charge  by 
$1,500,000,  while  the  act  of  1890,  and  accompanying 
extravagant  appropriations,  increased  the  debt  from 


61 


$585,029,330  in  1892  to  $635,041,890  in  1894.  At 
the  same  time  the  debt  on  which  no  interest  is  paid 
decreased,  from  1873  to  1879,  from  $472,069,333  to 
$410,835,742.  After  the  passage  of  the  Bland- 
Allison  act  in  1878,  and  of  the  Sherman  act  of  1890, 
and  up  to  1892,  it  increased  from  $410,835,742  to 
$1,000,648,939.  Since  the  repeal  of  the  Sherman 
act  this  debt  has  been  reduced.  Thus  the  people 
have  paid  off  about  $1,100,000,000  of  their  interest- 
bearing  debt  since  1873,  and  the  efforts  to  "  rehabili- 
tate silver  "  have  alone  checked  the  work  of  wiping 
out  this  burden. 

In  1873  the  net  deposits  in  the  national  banks  of 
the  United  States  were  $673,400,000;  in  1894  they 
were  $2,019,300,000.  I  have  not  the  data  of  savings- 
banks  prior  to  1883.  In  that  year  their  deposits 
amounted  to  $1,024,856,787.  In  1894  they  amount- 
ed to  $1,777,933,242. 

I  have  already  spoken  of  our  increased  production 
of  agricultural  wealth.  In  1873  this  country  ex- 
ported cotton  goods  of  the  value  of  $2,947,528.  In 
1894  its  exports  of  cottons,  had  increased  in  value 
to  $14,340,886.  In  1873  the  country  produced 
264,314,148  gallons  of  crude  petroleum,  and  in 
1894  its  production  had  increased  to  2,033,331,- 
972  gallons.  In  1873  the  total  product  of  cane- 
sugar  in  this  country  was  134,832,493  pounds;  in 
1894  it  was  610,825,618  pounds.  In  1873  our  wool 
product  was  158,000,000  pounds;  in  1894  it  was 


65 


298,057,384  pounds.  In  1874  we  manufactured 
2,401,262  tons  of  pig-iron  ;  in  1893  we  made  7,124,- 
502  tons. 

If  we  examine  the  statistics  of  this  period,  so 
prosperous  in  spite  of  adverse  tariff  and  silver  legis- 
lation, with  reference  to  the  population  of  the  coun- 
try, we  find  that  they  are  quite  as  encouraging.  In- 
creased wealth,  easier  circumstances,  are  shown  by 
the  lightening  of  the  burdens  of  debt  to  the  in- 
dividual, and  by  his  greater  consumption  of  the 
necessaries  and  luxuries  of  life. 

In  1873  the  public  debt  was  a  little  more  than 
$50  for  each  individual  in  the  country;  in  1894  it 
was  about  $13.  The  per  capita  consumption  of 
cotton  increased  from  15.19  to  15.91  pounds;  of 
sugar,  from  39.8  to  66.4  pounds;  of  coffee,  from 
6.87  to  8.01  pounds;  of  malt  liquors,  from  7.21  to 
15.18  gallons.  The  consumption  of  wheat  and  dis- 
tilled spirits  fell  off,  and  the  consumption  of  raw 
wool  remained  about  stationary.  The  revenue  of 
the  post-office  increased  from  55  cents  to  $1.10  per 
capita,  and  the  expenditures  from  70  cents  to  $1.24. 
The  expenditures  for  public  schools  increased  from 
$5.95  to  $8.31  per  capita,  1893  being  the  last  year 
for  which  data  are  available  on  this  subject. 

I  have  already  stated  the  decline  in  the  cost  of 
transportation  within  this  period.  In  1873  the 
average  toll  on  a  telegraph  message  was  62£  cents, 
and  the  profit  on  it  was  19.1  cents.  In  1894  the 

5 


66 


average   toll    was    30|-   cents,  and    the    profit    was 
slightly  less  than  10  cents. 

In  1870  the  true  value  of  real  and  personal  prop- 
erty in  New  England  and  the  Middle  States  was 
$15,290,032,687,  or  $1,243  per  capita;  in  1890  it 
was  $21,435,491,864,  or  $1,232  per  capita.  In  the 
Southern  Atlantic  States,  the  value  in  1870  was 
$2,249,280,146,  or  $384  per  capita;  in  1800  it  was 
$5,132,980,666,  or  $579  per  capita.  It  will  be  seen 
that  the  South  has  been  especially  blessed  with  in- 
crease of  wealth  since  the  commission  of  the  "  crime 
of  1873."  The  same  is  true  of  the  Middle  West, 
including  the  Dakotas,  Nebraska,  and  Kansas.  In 
the  twenty  years  the  property  of  that  section  in- 
creased in  value  from  $9,542,053,355  to  $25,255,- 
915,549,  or  from  $735  to  $1,129  per  capita.  The 
story  of  growing  prosperity  in  these  twenty  years  is 
repeated  in  the  Middle  South,  including  Kentucky 
and  Tennessee,  the  Gulf  States,  Arkansas,  Oklahoma, 
and  the  Indian  Territory.  The  value  of  property 
increased  there  from  $2,152,182,361  to  $6,401,281,- 
019,  or  from  $334  to  $569.*  In  the  Northwestern 
and  Pacific  States  the  census  statistics  tell  a  far 
more  wonderful  story  of  growth  in  wealth  and  pros- 
perity. In  1870  the  total  property  of  those  States 
and  Territories  was  valued  at  $834,969,958,  or  $843 
per  capita;  in  1890  it  had  increased  to  $6,811,422,- 
099,  or  $2,250  per  capita.  The  total  value  of  the 
*  Omitting  the  true  valuation  of  the  Indian  Territory. 


67 


real  and  personal  property  in  the  United  States  in 
these  twenty  years  increased  from  $30,068,518,507 
to  $65,037,091,197,  or  from  $780  to  $1,036  per 
capita.* 

In  the  mean  time  taxes  have  increased  and  de- 
creased in  the  various  sections  of  the  country,  as 
will  appear  from  the  following  table,  which  shows 
the  per  capita  rates  of  taxation : 

Divisions.  1870.  1890 

New  England  and  Middle   $10.07  $  10.29 

South  Atlantic. 3.97  3.69 

Middle  West 7.42  8.13 

Middle  South 4.18  3.35 

Northwest  and  Pacific 10.51  13.67 

United  States , 7.28  7.53 

Taxes  have  been  reduced  per  capita  in  the  South, 
and  slightly  advanced  in  the  whole  country. 

In  the  last  decade  the  total  State,  county,  and 
local  indebtedness  has  increased  in  the  whole  coun- 
try from  $1,123,278,647  to  $1,135,210,442,  but  it 
has  decreased  per  capita  from  $22.40  to  $18.13. 

The  free-silver  man's  tale  of  woe  seems  to  be  un- 
supported by  the  facts  of  the  country's  industrial 
history. 

*  Omitting  the  true  valuation  of  the  Indian  Territory. 


IN  all  that  I  have  said  thus  far,  I  have  simply  al- 
luded to  the  subject  of  international  bimetallism.  I 
have  refrained  from  dwelling  on  it  because  it  is  re- 
mote from  the  discussion  of  the  day.  Whether  by 
the  concurrence  of  all  the  nations  of  the  world  16  or 
15^  ounces  of  silver  could  be  made  equal  to  one 
ounce  of  gold,  it  seems  clear  to  me  that  the  world 
does  not  need  the  amount  of  metal  money  that  the 
universal  free  coinage  of  silver  might  provide,  for  it 
may  be  at  once  assumed  that  as  the  mints  of  the 
world  would  thereby  become  the  best  customers  of 
the  silver  mines,  most  of  the  'silver  mined  would  be 
made  into  coin.  Perhaps  the  whole  world  would  go 
to  a  silver  basis.  No  one  can  foresee  exactly  what 
would  happen,  but  if  the  expectation  of  the  bimetal- 
lists  were  realized  there  would  be  a  great  increase  in 
the  amount  of  metal  money  in  the  world,  and  if  I  am 
right  in  believing  that  I  have  succeeded  in  showing 
that  such  an  increase  is  not  needed,  the  metal  money 
added  to  the  present  store  would  represent  just  so 
much  wasted  effort,  energy,  and  wealth.  The  world 
can  no  more  procure  metal  money  for  nothing  than 


can  a  single  country.  If  the  storekeeper  provides 
himself  with  gold  and  silver  to  carry  on  the  transac- 
tions of  his  neighborhood  when  his  own  notes  will 
accomplish  the  task,  he  and  the  community  will  lose 
the  amount  of  useful  wealth  or  merchandise  with 
which  he  purchases  his  useless  hoard  of  silver  and 
gold.  As  it  is  with  the  storekeeper  so  it  has  been 
with  this  country,  and  so  it  will  be  with  the  world. 
I  have  already  shown  how  many  millions  the  United 
States  have  lost  through  the  compulsory  purchase  of 
silver,  and  how  much  greater  has  been  the  increase 
in  our  stock  of  metal  money  than  in  the  demands  of 
our  business  for  it.  If  our  village  storekeeper  should 
follow  the  example  of  the  United  States  and  should 
expend  all  his  wealth  for  gold  and  silver  coin,  trade 
between  the  farmers  and  himself,  either  direct  or  car- 
ried on  through  the  medium  of  the  speculator,  would 
come  to  an  end,  or  at  least  be  greatly  decreased. 
And  this  would  be  a  costly  experiment  for  the  mer- 
chant whose  wealth,  instead  of  being  in  goods  which 
he  could  sell  at  a  profit,  would  be  in  idle  coin,  which 
the  farmers  did  not  at  all  want.  Of  course  trade 
would  then  go  on  between  the  farmers  and  the  wiser 
merchants  of  a  neighboring  community,  and  the 
farmers  would  be  obliged  to  pay  for  the  transportation 
of  their  products  to  the  distant  point,  and  for  the 
transportation  back  of  the  goods  that  they  needed, 
and  for  which  they  would  exchange  their  own  prod- 
ucts. As  I  have  already  said,  the  farmer  pays  the 


70 


cost  of  transportation  both  ways.  There  is  another 
thing  that  might  happen.  Oar  original  shopkeeper 
might  be  a  cunning  man  wishing  to  make  money  out 
of  the  troubles  of  his  rural  neighbors.  He  might 
sell  his  goods  for  coin  in  order  to  lend  the  farmers 
money  to  transport  their  products,  or  by  way  of  ad- 
vance on  their  crops,  in  order  that  they  might  pur- 
chase what  they  needed  before  they  had  earned  the 
money  by  selling  their  products.  Here  is  another 
way  by  which  the  farmer  would  be  obliged  to  pay 
for  the  folly  or  the  cunning  of  the  storekeeper  in 
buying  unnecessary  coin  with  his  goods,  the  goods 
that  were  needed  in  the  homes  of  the  farmers. 

It  may  be  assumed  that  the  man  who  wants  money 
to  enable  him  to  exchange  his  products  or  his  day's 
work  for  the  necessaries  or  luxuries  of  life,  is  the  man 
who  pays  the  cost  of  extravagant  money  schemes ; 
and  bimetallism,  if  it  shall  be  adopted,  will  prove  no 
exception  to  the  rule.  Bimetallism  has  never  existed 
in  practice  in  the  world's  history.  It  has  been  de- 
creed by  law,  but  whenever  two  metals  have  been 
made  legal  tender  the  cheaper  has  invariably  driven 
the  dearer  metal  out  of  circulation.  In  our  own 
country  gold  was  undervalued  from  1792  to  1834,  and 
we  had  nothing  but  silver,  and  cheap  foreign  silver  at 
that,  as  circulating  coin,  and  after  that  silver  disap- 
peared, because,  at  the  established  ratio,  silver  was 
too  valuable  to  be  coined  into  dollars.  At  the  pres- 
ent time,  if  the  government  should  say  that  16 


71 


ounces  of  silver  shall  be  accepted  by  the  wage-earner, 
the  professional  man,  the  merchant,  and  the  manu- 
facturer, in  return  for  services  and  goods  that  are 
worth  1  ounce  in  gold,  it  would  cheat  the  producers 
and  working-people  of  the  country  out  of  about  16 
ounces  of  silver  on  every  such  transaction,  for  an 
ounce  of  gold  is  now  worth  about  32  ounces  of  silver. 
Perhaps  all  the  nations  of  the  world  together  might 
make  16  ounces  of  silver  equivalent  to  32  ounces,  but 
if  the  attempt  should  be  made,  any  one  of  the  na- 
tions might  break  the  agreement,  and  then  all  would 
be  confusion  in  the  world's  monetary  system.  And 
again,  if  all  the  governments  of  the  world,  agreeing, 
can  make  16  ounces  equal  to  32  ounces,  why  waste 
15  ounces?  why  not  make  1  ounce  equal  to  32? 
Why  use  silver  or  gold  ?  Why  not  adopt  the  iron 
unit  of  the  ancient  Spartans  ? 

I  am  not  trying  to  discuss  the  question  of  interna- 
tional bimetallism,  but  simply  to  indicate  the  uncer- 
tainties into  which  the  adoption  of  such  a  scheme 
would  plunge  us.  International  bimetallism  is  as 
much  an  intellectual  vice  as  is  the  game  of  chess 
when  it  is  played  too  much.  Ingenious  minds  like  to 
speculate  concerning  it,  and  they  enjoy  the  excite- 
ment of  chasing  their  own  fancies.  But  international 
bimetallism  is  not  a  practical  or  immediate  issue. 
What  this  country  and  the  world  want  above  all 
things,  and  just  now  especially,  when  business  seems 
to  be  reviving,  is  to  leave  existing  monetary  condi- 


tions  as  they  are,  so  far  as  the  metals  are  concerned. 
Above  all  else,  everything  that  is  uncertain  is  dan- 
gerous. 

So  far  as  the  United  States  are  concerned,  it  is 
certain,  for  it  has  been  demonstrated,  that  we  cannot 
maintain  bimetallism  alone ;  that  we  have  gone  be- 
yond the  danger  point  in  expending  revenue  and 
wealth  in  the  attempt  to  maintain  what  we  call  the 
parity  of  the  two  metals.  The  immediate  issue  be- 
fore the  country  is  not  international  bimetallism,  but 
silver  monometallism.  If  any  considerable  body  of 
people  want  international  bimetallism,  there  will  be 
ample  time  and  opportunities  to  discuss  that  question 
when  there  is  a  conference  of  the  nations.  As  it  is, 
our  people  are  not  concerned  with  it  at  all.  All  that  we 
have  to  decide  now  is  this :  Shall  Congress  pass  a  law 
which  will  compel  the  tax-payers  of  this  country  to 
buy  of  the  silver-mine  owners  16  ounces  of  silver 
with  goods  and  services  that  ought  to  command  32 
ounces  ?  Shall  our  whole  currency  system  be  con- 
fused by  a  double  standard  which  means  silver  mon- 
ometallism ?  Shall  prices  be  measured  in  a  fluctuat- 
ing medium  ?  Shall  our  foreign  exchanges  be  com- 
plicated to  the  profit  of  the  money-broker  and  the 
loss  of  the  producer  and  the  working-man  ?  Shall  we 
have  a  money  that  may  scale  down  debts,  but  which 
will  destroy  our  credit,  drive  capital  out  of  the  coun- 
try, especially  from  those  parts  of  the  country  which 
need  development,  and  transfer  the  United  States 


THE  COMRADES  THAT  FREE  COINAGE  WOULD  MAKE  FOR  UNCLE  SAM 


73 


from  among  the  great  commercial  nations  and  make 
it  the  monetary  comrade  of  China,  Japan,  India,  and 
the  South  and  Central  Americas?  These  are  the 
questions  which  the  people  of  this  country  must  an- 
swer at  once,  and  any  one  who,  under  these  condi- 
tions, undertakes  to  talk  to  them  about  international 
bimetallism  is  their  enemy,  for  he  is  trying  to  deceive 
and  confuse  them. 


XII 

IN  conclusion,  I  will  restate  some  of  the  proposi- 
tions that  I  have  laid  down  and  endeavored  to  sus- 
tain in  these  papers.  I  began  with  the  proposition 
that  money  is  not  a  good  in  itself,  but  only  as  it 
easily  and  conveniently  procures  for  its  possessors 
what  they  need  or  desire.  It  saves  the  trouble  and 
expense  of  barter.  It  represents  food,  raiment, 
shelter,  and  other  necessaries  of  life  as  well  as  its 
luxuries. 

The  quality  that  money  should  possess  ought  to 
be  clear  to  every  one.  It  must  be  honest  money. 
If  it  is  metal  it  must  be  intrinsically  worth  the  sum 
it  professes.  If  it  is  paper  it  must  be  redeemable 
in  the  amount  called  for  by  its  face.  It  must  mean 
what  it  says.  It  must  not  only  actually  possess 
these  qualities,  but  those  who  are  asked  to  accept  it 
in  return  for  their  products  and  goods  must  believe 
that  it  does.  In  the  simple  community  the  store- 
keeper's orders  possessed  these  qualities,  and  they 
passed  as  money.  So  bank  paper  passes  in  the 
country  in  which  the  bank  is  situated,  whose  people 
believe  that  the  bank  is  sound.  But  in  international 


75 


commerce,  gold  is  the  only  money  that  is  universally 
recognized,  and  it  is  necessary,  therefore,  for  this 
country  and  for  all  countries  that  carry  on  commerce 
to  accept  gold  as  the  standard  of  value.  Otherwise 
there  must  be  confusion  arising  from  fluctuations  in 
exchange,  which  would  be  largely  due  to  fluctua- 
tions in  the  price  of  any  other  metal  than  gold  that 
became  the  standard  of  value  of  the  country  depart- 
ing from  the  gold  standard. 

Whatever  may  be  said  in  favor  of  international 
bimetallism,  international  bimetallisn  is  not  an  im- 
minent question.  The  first  question  that  this  coun- 
try must  answer  is  whether  it  will  abandon  the 
monetary  system  which  prevails  among  the  stronger 
nations  of  the  world,  and  adopt  that  which  prevails 
among  the  weaker  nations,  whether  it  will  abandon 
gold  and  take  silver  as  its  standard.  It  has  been 
proved  that  it  cannot  alone  maintain  silver.  The 
panic  of  1893  demonstrated  this  to  intelligent  minds. 
It  has  also  been  proved  that  it  cannot  alone  main- 
tain the  price  of  silver,  which  has  been  falling  for 
nearly  thirty  years.  The  failure  of  the  attempts  to 
do  so  through  the  acts  of  1878  and  1890,  is  a  sig- 
nal proof  of  the  inability  of  this  country,  acting 
alone,  to  make  sixteen  ounces  of  silver  equal  to  one 
ounce  of  gold,  when  in  the  markets  of  the  world 
thirty-two  ounces  of  silver  are  equal  in  value  to  one 
ounce  of  gold.  The  only  ground  on  which  the 
single  silver  standard  could  be  maintained  is  that 


76 


we  may  be  independent  of  Europe ;  but  to  say  that 
our  commercial  life  could  be  maintained  in  vigorous 
health  with  any  other  than  the  world's  monetary 
standard,  is  like  saying  that  our  physical  and  mate- 
rial well-being  could  be  preserved  if  we  could  and 
did  shut  out  the  beneficent  light  and  heat  of  the  sun 
of  the  universe.  International  commerce  is  part  of 
our  existence.  We  cannot  live  without  it,  as  our 
farmer,  who  is  our  principal  exporter,  ought  to  know. 
If  we  should  try  to,  he  and  the  man  who  lives  by  his 
personal  services  would  be  the  first  to  discover  what 
it  means  to  be  in  the  hands  of  the  money-broker,  as 
they  found  out  before  when  we  paid  for  our  green- 
back debauch,  and  when  Europe  in  1893  began  to 
doubt  our  intentions  as  to  silver. 

The  quality  of  the  money  and  currency  which  we 
need  being  established,  the  question  is  as  to  its 
quantity.  I  have  endeavored  to  show  that  this 
quantity  is  dependent  on  the  demands  of  business. 
The  amount  of  money  in  circulation  is  the  amount 
needed  to  carry  on  the  trade  and  commerce  of  the 
country,  and  that  ought  to  fix  the  amount  of  money 
in  existence.  A  currency  that  responds  to  the  de- 
mands of  business,  expanding  with  a  brisk  trade  and 
a  large  demand  for  the  tool  of  exchange,  and  con- 
tracting when  trade  is  dull  and  the  demand  is  light, 
is  an  elastic  currency.  Our  own  currency  is  not 
elastic.  No  human  prescience,  least  of  all  the  pre- 
science of  the  excellent  but  inexperienced  gentle- 


77 


men  who  are  elected  to  Congress,  can  fix  the  amount 
of  money  that  is  needed  by  the  business  interests  of 
this  country.  They  have  attempted  it  and  failed. 
They  have  not  understood  the  great  truth  which 
was  illustrated  in  the  imaginary  account  of  the  trans- 
actions between  the  storekeeper  and  the  wheat  buyer 
and  the  wheat  buyer  and  the  farmer,  the  fact  that 
one  dollar  of  money  or  currency  carries  many  dollars 
of  transactions.  They  have  added  to  the  currency 
of  the  country  since  1873  the  sum  of  $1,657,000,000, 
but  the  business  of  the  country  has  employed  only 
$937,000,000  of  this  great  amount.  Was  there  ever 
a  finer  demonstration  of  folly  ?  And  this  enormous 
and  needless  addition  to  the  money  of  the  country 
has  been  expensive.  Without  counting  other  ele- 
ments of  extravagance,  the  government  has  lost 
$156,000,000  on  the  value  of  the  bullion  it  purchased 
under  the  acts  of  1878  and  1890  alone.  -Business 
alone  can  determine  how  much  money  a  country 
needs,  and  business  has  determined  in  this  country 
that  politicians  have  added  too  much  to  our  stock 
of  money,  and  that  they  have  wasted  valuable  time, 
energy,  and  wealth  in  the  commission  of  this  grievous 
mistake. 

Not  only  has  the  country  a  great  supply  of  money. 
It  has  too  much  of  certain  kinds,  and  no  elastic  cur- 
rency whatever.  It  has  more  than  it  ever  had  be- 
fore, and  more  than  is  held  by  any  great  commercial 
nation.  Moreover,  we  have  enough  gold  to  sustain 


78 


a  bank-note  or  paper  circulation,  on  the  basis  of  the 
Treasury's  gold  reserve,  greater  than  our  whole  pres- 
ent circulation. 

There  is  no  need  for  more  money  in  this  country. 
There  is  every  reason  why  the  present  gold  standard 
should  be  maintained.  I  do  not  believe  in  interna- 
tional bimetallism,  but,  even  if  its  adoption  would 
be  beneficial  to  the  world,  the  question  is  now  wholly 
speculative.  Until  there  is  a  stronger  movement 
towards  that  end  than  now  exists,  this  country  has 
only  one  of  two  courses  to  take — either  to  retain  its 
present  system,  which  makes  the  gold  dollar  the 
standard,  or  to  adopt  the  South  American  system, 
which  makes  the  silver  dollar  the  standard.  Most 
of  the  present  talk  about  international  bimetallism 
comes  from  politicians  who  are  trying  to  deceive  the 
people,  and  especially  the  silver  men.  They  are 
fishing  for  silver  votes.  But  what  the  silver  men 
want  is  the  free  coinage  of  silver  at  the  ratio  of  16 
to  1,  and  they  want  this  country  to  adopt  that  system 
independently  of  other  nations.  They  do  not  care 
what  happens  to  the  commerce  of  the  country,  nor 
to  the  farmer,  whose  products  constitute  the  larger 
part  of  the  goods  that  are  sold  to  foreign  countries, 
so  long  as  they  can  sell  fifty  cents  worth  of  silver 
for  a  dollar.  The  international  bimetallic  politician 
cannot  deceive  the  silver-mine  owner,  nor  can  the 
silver-mine  owner,  I  trust,  deceive  the  farmer,  the 
mechanic,  the  wage-earner,  the  professional  man,  the 


THE    DEAD-HORSE    PARTY   THINKS    IT   IS   DOING   ALL    THE   WORK 


79 


merchant,  who  make  up  the  people  for  whose  bene- 
fit this  country  ought  to  be  governed. 

In  the  course  of  these  papers,  while  I  have  been 
trying  to  establish  the  propositions  that  the  money 
we  need  is  honest  money,  the  world's  money,  and, 
under  existing  conditions,  gold  money ;  that  the 
amount  we  need  cannot  be  determined  by  politicians, 
but  must  be  fixed  by  the  demands  of  business ;  and 
that  these  demands  have  shown  that  we  already  pos- 
sess more  money  than  we  need,  and  that  the  redun- 
dance has  cost  us  dear,  I  have  also  shown  that  prices 
are  not  dependent  on  money,  that  the  so-called  "  de- 
monetization "  of  silver  did  not  cause  a  fall  in  prices, 
and  that  the  country  has  prospered  greatly  since 
1873,  notwithstanding  the  mournful  outcries  of  the 
bimetallists.  Whatever  may  be  the  present  state  of 
the  public  mind  in  this  country  on  the  subject  of 
money,  I  have  no  doubt  that  reflection  and  study 
will  bring  the  people  to  the  conclusions  that  I  have 
reached.  There  is  no  economic  problem,  especially 
no  problem  involving  a  moral  issue,  that  the  people 
of  the  United  States  have  not  solved  on  the  side  of 
honesty  and  common-sense,  after  a  full  and  free  dis- 
cussion. Such  a  free  and  full  discussion  is  now  in 
progress  on  the  money  question,  and  I  am  confident 
that  the  United  States  will  not  consent  to  become 
one  of  the  cheap-money  nations  of  the  earth,  but 
will  insist  on  remaining  among  the  sound-money 
nations. 


BIMETALLISM  IN  HISTORY 


"  Now  these  are  the  names  of  the  different  pieces  of 
their  gold,  and  of  their  silver,  according  to  their  value. 
And  the  names  are  given  by  the  Nephites  :  for  they 
did  not  reckon  after  the  manner  of  the  Jews  who  were 
at  Jerusalem;  neither  did  they  measure  after  the  man- 
ner of  the  Jews,  but  they  altered  their  reckoning  and 
their  measure,  according  to  the  minds  and  the  circum- 
stances of  the  people,  in  every  generation,  until  the 
reign  of  the  Judges  ;  they  having  been  established  by 
King  Mosiah" — BOOK  OF  MORMON,  BOOK  OF  ALMA, 
chapter  viii.,  verse  8. 


The  only  supernatural  authority  which  has  been 
found  for  the  almost  universal  practice  of  trying  to 
make  two  unequal  things  equal  is  that  which  is 
printed  above  from  the  Book  of  Mormon.  The  au- 
thority must  stand  on  its  merits.  The  fact,  however, 
of  the  failure  of  the  efforts  to  use  silver  and  gold  as 
the  standard  of  value,  as  if  their  equality  could  be 
compelled,  leaves  this  solitary  utterance  of  alleged 
inspiration  in  a  bad  way. 


I 

FROM    1600    TO    1792 

WHEN  the  Puritans  came  to  Massachusetts  Bay  in 
1630,  England  alone  of  all  the  nations  of  Europe 
was  endeavoring  to  maintain  the  double  standard. 
On  the  Continent  of  Europe  silver  was  frankly  the 
standard.  That  great  commercial  country,  Holland, 
maintained  the  silver  standard  from  1609  until  recent 
years. 

When  this  country  was  discovered  the  store  of 
gold  and  silver  in  the  world  was  very  small.  The 
quantity  of  the  product  from  1493  to  1850  was  8  of 
silver  to  1  of  gold,  but  the  ratio  of  value  was  10.75 
of  silver  to  1  of  gold.  This  difference  may  be  ac- 
counted for  by  the  greater  comparative  difficulty  of 
obtaining  gold.  At  this  period  gold  came  from 
West  Africa,  while  silver  was  mined  in  Saxony  and 
Bohemia.  The  relative  values  of  the  two  metals 
have  changed  with  the  relative  products  of  the  mines. 
At  the  same  time,  the  use  of  silver  as  money,  which 
is  as  old  as  the  coinage  of  the  precious  metals,  shows 
that  there  are  other  causes  than  varying  production 
that  govern  the  price  of  the  white  metal,  and  when 
we  come  to  the  era  of  demonetization  of  silver  we 


84 


shall  find  the  most  potent  of  all  causes,  except,  perhaps 
the  discovery  of  the  great  silver  mines  of  the  West. 

In  1630  when  the  Puritans  came  to  Massachusetts, 
and  when  the  commercial  Hollanders  were  in  New 
Amsterdam,  the  world's  supply  of  the  two  metals 
was  still  very  small.  During  this  period  gold  had 
been  found  in  New  Granada,  silver  mines  that  had 
been  worked  by  the  Aztecs  had  been  discovered  by 
the  Spaniards  in  Mexico,  the  still  celebrated  mines 
of  Potosi,  in  Bolivia,  had  been  found,  and  the  patio 
process  of  working  ore  had  been  invented.  Between 
1601  and  1620  more  than  three  times  as  much  silver 
was  produced  as  had  been  mined  up  to  1545,  and  its 
price  had  fallen  until  12.25  ounces  of  silver  were 
required  for  the  purchase  of  an  ounce  of  gold.  In 
the  next  twenty  years  there  was  a  slight  decline  of 
product,  but  the  output  of  both  gold  and  silver  was 
still  very  large,  while  the  price  of  silver  fell  so  that 
the  ratio  between  it  and  gold  was  14  to  1.  Here 
was  a  relative  decrease  in  the  product  of  silver,  ac- 
companied by  an  important  fall  in  price. 

In  the  meantime  England  was  struggling  with 
bimetallic  difficulties  in  its  attempt  to  sustain  the 
two  metals.  Gold  was  rising  in  value  when  James 
I.  came  to  the  throne,  and  during  the  period  which 
we  are  now  considering — 1600  to  1792 — gold  rose 
or  silver  fell  until  the  ratio  between  the  two  in- 
creased from  H.80  to  15.17.  In  the  intervening 
years  it  had  not  been  less  than  12.25,  but  several 


85 


times  it  had  been  higher  than  15.17.  An  attempt 
was  made  in  this  reign  to  fix  the  ratio  by  law  at 
13  to  1  at  a  time  when  the  market  ratio  was  really 
about  12  to  1,  and  the  consequence  was  the  exporta- 
tion of  silver  from  the  kingdom  and  general  distress 
among  the  working-people.  In  1614  the  king  or- 
dered that  the  exportation  of  coin  should  cease. 
This  was  naturally  ineffective.  Proclamation  after 
proclamation  followed,  and  Charles  I.  continued  the 
absurd  financial  policy  of  his  father.  The  Star 
Chamber  undertook  the  enforcement  of  the  proc- 
lamations, and  in  1636  there  was  a  further  dem- 
onstration of  Gresham's  law.  The  guineas  were 
selling  for  a  premium  in  clipped  shillings,  and  the 
law  undertook  to  fix  their  value,  decreeing  that  a 

'  O 

guinea  should  not  be  taken  for  more  than  a  certain 
number  of  shillings.  The  good  shillings  were  worth 
more  than  this  and  at  once  disappeared  in  the  melt- 
ing-pot, the  worn  and  clipped  shillings  alone  appear- 
ing in  circulation.  Trade  sprang  up  in  the  good 
shillings,  and  in  the  case  before  the  Star  Chamber 

O     i 

seven  persons  were  convicted  of  "  culling  out  the 
most  weighty  pieces  of  the  coin  of  this  realm  and 
melting  them  down  and  exporting  the  same,  as  well 
as  foreign  coin  and  bullion,  to  foreign  ports."  The 
culprits  were  fined  £8100,  it  having  been  shown  to 
the  satisfaction  of  the  Star  Chamber  that  they  had 
made  a  profit  of  between  £7000  and  £8000  a  year 
by  their  practices, 


In  the  reigns  of  William  III.  and  George  I. 
various  efforts  were  made  to  stop  the  traffic  in  gold 
and  good  silver  coin.  French  louis-d'or  and  moi- 
dores  were  found  circulating  in  England  at  a  valuation 
greater  than  their  intrinsic  worth.  The  law,  there- 
fore, decreed  that  they  should  pass  for  their  real 
worth,  and  they  immediately  disappeared  from  cir- 
culation. Under  an  act  of  William  III.  (1696), 
which  endured  for  sixteen  days,  the  guinea  was 
made  worth  twenty-six  shillings.  At  the  end  of 
that  brief  time  another  act  made  the  guinea  worth 
twenty-two  shillings.  Both  were  ineffectual. 

Nothing  but  clipped  or  cheap  money  passed. 
Gold  was  undervalued  as  to  worn  shillings,  and 
overvalued  as  to  good  shillings,  while  the  good 
shillings  were  melted  into  bullion  and  bought  and 
sold  as  a  commodity.  In  1699  the  silver  of  the 
kingdom  was  recoined  at  an  enormous  loss  to  the 
Government,  and  at  about  the  same  time  John  Locke 
came  to  the  conclusion,  which  he  stated  in  a  letter 
to  Sir  John  Somers,  Keeper  of  the  Great  Seal,  that 
there  should  be  only  one  metal  coined,  and  that 
should  be  silver,  for,  notwithstanding  the  theoretical 
double  standard  of  Great  Britain,  silver  was  "  the 
money  of  the  world,"  as  Locke  stated  it  to  be,  just 
as  much  in  the  time  of  William  III.  and  George  I. 
as  it  had  been  in  the  days  when  the  patriarchs  of 
the  Old  Testament  bought  their  fields  and  flocks 
with  silver  shekels. 


87 


Notwithstanding  the  recoinage,  clipped  silver  con- 
tinued to  circulate  and  the  new  and  good  coins 
disappeared.  In  the  last  forty  years  of  the  seven- 
teenth century  only  £64,000  was  brought  to  the 
mint  to  be  coined.  The  speculative  character  of  the 
currency  brought  great  distress.  In  171 7  Sir  Isaac 
Newton,  then  Master  of  the  Mint,  was  asked  by 
George  I.  for  an  opinion,  and  he  recommended  the 
reduction  of  the  guinea  to  twenty-one  shillings. 
This  did  not  retain  the  good  silver,  for  then  the 
guinea  was  worth  only  20s.  8d. 

In  the  meantime  the  currency  difficulties  of  the 
mother  country  were  experienced  in  the  Amer- 
ican colonies,  where,  in  1652,  a  mint  had  been  il- 
legally established  at  Boston  for  the  coinage  of  light 
"  Pine-tree "  shillings.  Finally  the  evil  became  so 
great  that,  in  1774,  an  act  of  Parliament  was  passed 
limiting  the  right  to  coin  silver  to  the  Government 
and  making  it  a  legal  tender  by  tale  to  the  amount  of 
,£25.  Above  that  it  was  legal  tender  by  weight  only. 

This  was  the  state  of  the  silver  question  when  the 
first  coinage  act  of  this  country  was  passed  in  1792. 
The  act  of  1774  was  powerless  to  fix  the  mutual 
ratio  of  gold  and  silver  values.  The  ratio  in  1773 
and  1774  was  14.62  to  1.  In  1775  it  rose  to  14.72, 
but  in  1776,  when  the  act  was  extended,  for  at  first  it 
was  only  temporary,  the  ratio  fell  to  14. 55,  and  in  1777 
it  fell  still  further,  to  14.54.  Silver  grew  dearer, 
notwithstanding  adverse  legislation  in  Great  Britain. 


II 

A    SINGLE    STANDARD    ADOPTED    IN    EUROPE 

THE  first  coinage  act  for  the  United  States  was 
passed  in  1792.  Silver  was  actually  first  coined  in 

1794,  and  gold  in  1795.     The  first  silver  dollar  con- 
tained the  same  number  of  grains  of  fine  silver  as 
the  standard  dollar  of  to-day.     Gold  was  coined  in 

1795,  and  the  gold  dollar  contained  24.75  grains  of 
pure  gold. 

England  was  still  struggling  with  the  currency 
question.  Her  commerce,  manufactures,  and  work- 
ing-people were  suffering  by  reason  of  uncertainty 
as  to  the  value  of  her  circulating  coins.  Although 
the  gold  sovereign  was  the  standard  of  value,  silver 
was  a  legal  tender  for  all  debts.  It  is  true  that  it 
was  a  legal  tender  by  tale  only  to  the  amount  of  £25, 
"but  for  amounts  above  that  it  was  legal  tender  by 
weight.  In  the  early  part  of  the  eighteenth  century 
silver  was  generally  supposed  in  commercial  circles 
to  be  the  English  standard,  and  Adam  Smith,  in  his 
explanation  of  the  principle  of  foreign  exchange, 
assumed  that  the  metallic  currencies  of  England  and 
France  were  the  same,  and  that  both  were  silver. 
In  this  country  we  began  by  undervaluing  gold, 


89 


making  the  ratio  15  to  1,  whereas  the  true  ratio,  in 
1792,  was  15.17  to  1.  The  latter  was  the  ratio  in 
England. 

England  adopted  the  single  gold  standard  in  1798, 
six  years  after  the  enactment  of  our  first  coinage 
law.  The  temporary  law  of  1774  having  been  con- 
tinued in  1776,  was  again  extended  in  1798  by  acts 
which  prohibited  the  importation  of  light  silver  coin, 
restrained  the  tender  thereof  beyond  a  certain  sum, 
suspended  the  coinage  of  silver,  and  prohibited  the 
reception  of  any  silver  to  be  coined,  or  any  silver  al- 
ready coined  to  be  delivered.  The  first  of  the  acts 
of  1798  ran  by  its  terms  to  January  1,  1799,  and  in 
that  year  the  two  coinage  and  currency  acts  of  1798 
were  revived  and  made  perpetual. 

Thus  England  passed  under  the  gold  standard ; 
for  gold  becomes  the  single  standard  of  a  country 
when  the  mints  are  closed  to  private  coinage  of 
other  metals.  The  silver  that  was  in  circulation 
continued  to  pass  from  hand  to  hand  at  the  estab- 
lished rate  of  21  to  the  guinea,  much  to  its  advan- 
tage, for  the  suspension  of  further  coinage  of  silver 
bullion  raised  the  value  of  both  the  gold  and  the 
current  silver  coins.  Silver  was  overrated  by  the 
mint  laws,  for  while  its  market  price  was  ranging 
from  5s.  an  ounce  to  5s.  l-|-d.,  it  would  have  become 
worth  5s.  2d.  by  being  coined. 

The  effect  of  the  act  of  1798  on  the  comparative 
prices  of  silver  and  gold  was  not  serious.  Silver 


rose  from  5s.  4c?.  to  55.  6d.  under  the  act  of  1797, 
restricting  the  payment  of  specie  by  the  Bank  of 
England  in  anticipation  of  a  possible  discount  on 
bank-notes,  but  in  September  of  the  same  year  it  fell 
back  to  5s.  Id.,  and  it  remained  in  that  neighbor- 
hood for  some  time.  The  following  are  the  ratios  of 
values  for  the  ten  years  following  the  passage  of  the 
act  of  1798: 


1799 15.74  to  1 

1800 15.68  to  1 

1801 15.46  to  1 

1802 15.26  to  1 

1803 15.41  to  1 


1804 15.41  to  1 

1805 15.79  to  1 

1806 15.52  to  1 

1807 15.43  to  1 

1808 16.08  to  1 


From  this  statement,  taken  from  Dr.  Soetbeer's 
tables,  it  appears  that  the  market  value  of  silver 
during  the  five  years  following  1799  was  higher 
than  the  price  obtaining  that  year.  In  1803  France 
adopted  by  law  the  silver  franc  as  the  monetary  unit, 
and  Belgium,  Italy,  Greece,  and  Switzerland  followed. 
These  nations  then  fixed  the  ratio  at  15^  to  1. 
The  product  of  silver  between  1801-1810  was  a 
little  more  than  50  per  cent,  of  the  total  product  of 
the  two  metals,  and  while  the  price  decreased  in 
1805,  probably  in  consequence  of  the  increased  out- 
put, it  increased  in  1806  and  1807,  presumably  in  con- 
sequence of  the  acts  of  the  Continental  Governments. 
In  1808  the  price  fell  to  a  point  lower  than  it  had 
ever  yet  reached,  but  it  recovered  in  1809,  1810,  and 
1811,  although  it  did  not  reach  the  prices  of  1801 
and  the  year  immediately  following. 


91 


The  gold  standard  was  not  formally  adopted  by 
England  until  .181 6,  and  even  that  act  was  followed 
by  a  general  rise  in  the  price  of  silver.  Gold  seems 
to  have  been  chosen  instead  of  silver,  because  the 
"  common  people"  had  found  it  more  convenient. 
Transactions  of  any  importance  required  so  great  a 
weight  of  silver  that  the  burden  of  transportation 
became  onerous  and  expensive.  Native  gold  coins 
were  not  circulating  in  England  in  the  last  years  of 
the  seventeenth  century,  but  the  French  gold,  under- 
valued at  home,  as  we  have  already  seen,  was  circu- 
lating at  more  than  its  intrinsic  worth.  Lord  Liver- 
pool, speaking  of  this  era,  said  : 

"  It  is  evident  that  *  *  *  the  common  people  had 
become  accustomed  to  the  use  of  gold  coins,  and  the 
reason  which  induced  them  still  to  prefer  them  was, 
perhaps,  the  convenience  of  making  large  payments 
in  coins  of  that  metal." 

Silver  is  still  legal  tender  in  Great  Britain,  but 
only  to  the  amount  of  £2,  and  the  legal  ratio  is 
14.28781  to  1.  Silver  is  coined  on  account  of  the 
Government  only.  Gold  is  coined  at  private  account 
at  the  fixed  rate  of  £3  17s.  lO^d.  per  ounce.  Prac- 
tically the  Bank  of  England  alone  sends  gold  bars 
to  the  mint  for  coinage,  paying  individual  owners 
of  bullion  £3  17s.  9o?.,  the  l^d.  being  supposed  to 
compensate  the  bank  for  the  loss  of  interest  while 
the  bars  are  being  transformed  into  coin.  Most  of 
the  English  colonies  have  adopted  the  gold  stand- 


ard  and  the  monetary  system  of  tlie  mother  country. 
The  monetary  unit  in  Canada,  however,  is  the  gold 
dollar  of  the  United  States.  The  Straits  Settlements 
and  Hong-Kong  have  adopted  the  single  silver  stand- 
ard, because  it  is  in  harmony  with  the  currency  of 
the  adjoining  peoples. 

The  British  India  currency  law  dates  back  to  1835. 
It  makes  the  country  silver  monometallic,  and  the 
rupee  the  monetary  unit.  The  mohur  is  a  gold  coin, 
but  gold  is  not  a  legal  tender.  The  ratio  of  coinage 
is  15  to  1.  The  recent  suspension  of  silver  coinage 
for  private  account  places  India  on  a  gold  basis,  and 
unless  there  is  a  return  to  the  old  order  the  gold 
standard  must  be  formally  adopted.  A  money  stand- 
ard of  a  metal  that  cannot  be  coined  on  private  ac- 
count is  an  anomaly  that  will  not  endure. 

It  will  be  seen  from  an  examination  of  the  various 
coinage  laws  of  Europe  that  Locke's  dictum  was 
growing  in  favor,  and  that  the  experiences  of  the 
commercial  countries  of  the  world  had  gradually  led 
men  of  affairs  to  the  conclusion  that  no  nation  could 
maintain  a  double  standard.  The  growth  of  inter- 
national commerce  had  led  to  the  invention  of  bills 
of  exchange.  The  rate  for  bills  of  exchange  was 
easily  computed  if  the  countries  between  which  they 
circulated  possessed  the  same  standard  of  value,  the 
same  ratio,  and  coins  of  like  intrinsic  value  ;  but  as 
this  was  never  the  case,  and  the  price  varied  with 
fluctuations  in  the  market  values  of  the  two  metals, 


93 


with  their  exports  and  imports,  with  legislative  acts, 
and  with  increase  or  diminution  of  product,  the  trade 
in  bills  of  exchange  became  a  speculation  in  gold, 
and  silver.  Foreign  commerce  and  domestic  trade 
became  unsettled.  Therefore,  at  the  beginning  of 
the  present  century  there  was  a  general  tendency  in 
Europe  towards  monometallism.  England  chose  gold 
and  France  silver.  But  although  it  was  the  inten- 
tion of  the  French  to  establish  a  single  silver  stand- 
ard, the  law  of  1803  was  bimetallic,  and  gold  was 
not  driven  out  of  circulation  until  under  the  Napo- 
leonic wars  the  price  of  gold  rose,  and  silver  alone 
circulated.  From  1820  to  1847  gold  was  constantly 
at  a  premium  in  France. 

When  England  adopted  the  single  gold  standard 
the  Netherlands  was  a  silver  monometallic  country, 
but,  while  it  did  not  follow  England's  example,  it 
adopted  the  double  standard  in  1816,  returning  in 
1847  to  the  single  silver  standard. 

Germany  was  a  single  silver  standard  country  until 
its  currency  reform  of  1871.  Austria  has  also  been 
a  single  silver  standard  country,  although  it  is  now 
putting  into  operation  the  single  gold  standard 
system. 


Ill 

THE  GOLD  MOVEMENT  IN  EUROPE 

THE  tendency  of  European  countries  in  the  early 
part  of  the  present  century  was  towards  the  adop- 
tion of  the  single  standard.  This  course  was  dic- 
tated by  common  prudence  and  a  desire  to  simplify 
transactions  between  the  various  countries. 

M.  Chevalier  was  the  most  conspicuous  advocate 
in  Europe  of  the  use  of  silver  as  a  money  metal,  and 
he  is  authority  for  the  statement  that  gold  disap- 
peared from  France  during  the  Napoleonic  wars  and 
was  not  in  circulation,  while  Mr.  Giffen,  the  eminent 
English  statistician,  asserts  that  gold  was  constantly 
at  a  premium  in  France  from  1820  to  1850.  During 
the  thirty  years  France  was  a  silver  country  and  gold 
was  expelled,  until  in  1848,  the  Bank  of  France  had 
hardly  any  gold  in  its  vaults.  It  ought  to  be  ex- 
plained that  it  is  a  mistake  to  suppose  that  the 
French  law  of  1803  first  fixed  the  ratio  of  15^  to  1. 
If  there  is  any  magic  in  that  ratio  to  keep  the  metals 
at  a  parity,  it  had  an  opportunity  to  show  itself  in 
the  reign  of  Louis  XVI.,  for  Colonne  fixed  the  ratio 
15|  to  1  'ln  1*785,  and  the  statute  of  1803  merely 
affirmed  what  already  existed,  and  extended  its  life. 


95 


Colonne  chose  the  ratio  because  gold  was  thereby 
overvalued. 

In  1785  the  commercial  ratio  was  14.92  to  1,  and 
in  1803  it  was  15.41.  This  ratio  was  maintained  for 
two  years,  but  in  1805  it  became  15.79  to  1 ;  in  1806 
it  was  15.52  ;  in  1807  it  fell  below  the  French  legal 
ratio  once  more,  but  gold  recovered,  and  in  1808  the 
actual  ratio  was  16.08  to  1.  It  was  not  again  as  low 
as  15^-  until  1814,  and  for  six  years  gold  was  over- 
valued by  the  French  coinage  law.  In  1820,  how- 
ever, the  ratio  was  once  more  above  15^-,  and  re- 
mained above  for  thirty  years.  It  did  not  fall  again 
until  1851,  under  the  influence  of  the  gold  discov- 
eries in  California  and  Australia.  Once  more  the 
ratio  was  below  15^-  for  one  year  only.  In  1852  it 
was  15.59.  It  again  fell  below  15|-  in  1853,  and  re- 
mained below  for  eight  years.  In  1861  the  actual 
and  legal  ratios  in  France  were  the  same ;  for  the 

o  ' 

next  five  years  gold  was  overvalued.  In  1867  it  was 
again  undervalued,  and  the  difference  since  then  has 
been  increasing,  owing  to  the  depreciation  of  silver. 
The  experience  of  France  in  undertaking  to  main- 
tain the  parity  of  the  two  metals  was  not  happy. 
Since  Colonne  determined  on  the  ratio  of  15^  to  1, 
one  hundred  and  ten  years  ago,  that  ratio  has  been 
below  the  market  ratio  seventy-three  years ;  it  has 
been  equal  to  the  market  ratio  one  year,  and  above  it 
thirty-six  years.  In  other  words,  it  has  expressed 
the  truth  once  during  that  long  period.  Since  1803 


96 


has  been  undervalued  in  France  sixty-eight 
years,  correctly  valued  one  year,  and  overvalued 
twenty-two  years. 

It  was  the  intention  of  the  frarners  of  the  law  of 
1803  to  provide  France  with  a  single  standard  of 
silver,  but  nature  was  against  them,  and  by  circu- 
lating gold  the  tendency  was  to  exclude  their  favor- 
ite metal  from  circulation,  until  war  came  to  the 
assistance  of  the  financiers,  when  the  ratio  of  15^ 
to  1  became  an  undervaluation  of  gold,  whereupon 
gold  disappeared  and  silver  constituted  the  circu- 
lation. 

Silver  was  the  circulating  medium  in  1803,  and 
remained  so  until  the  great  gold  discoveries  brought 
a  flood  of  the  yellow  metal  to  Europe.  Between 
1851  and  1853  gold  began  to  appear  in  the  French 
circulation,  and  the  people,  like  the  people  of  Eng- 
land in  the  last  decade  of  the  seventeenth  century, 
found  it  preferable,  by  reason  of  its  smaller  bulk  and 
weight,  to  the  heavy  five-franc  pieces. 

This  state  of  things  lasted  until  1867,  when  the 
discovery  of  the  great  silver  deposits  had  begun  to  be 
made.  The  Cornstock  lode  was  discovered  in  1859, 
but  the  Belcher  Bonanza  was  not  found  until  1864; 
the  Chollar-Potosi  bonanza  in  1865;  the  Hale  and 
Norcross  bonanza  in  1866.  During  the  period  when 
the  gold  discoveries  were  being  made  the  price  of 
silver  gradually  rose  in  London  from  59^d.  per 
ounce  in  1848  to  61fc?.  in  1864,  but  it  did  not  fall 


97 
below  QOd.  until  1873,  when  the  average  price  was 


In  the  meantime  the  commercial  countries  of  Eu- 
rope were  coming  to  the  gold  standard.  The  attempt 
to  maintain  the  single  silver  standard  was  about  to 
be  abandoned.  So  much  silver  was  deposited  for 
coinage  at  the  mint  of  France  that  the  mint  could 
not  have  performed  its  expected  task  in  much  less 
than  two  years.  The  currency  was  becoming  in- 
flated. Exchanges  were  disturbed,  and  France  was 
suffering  from  cheap  money.  In  addition  to  the  sil- 
ver thrown  upon  the  market  by  the  extraordinary  in- 
crease of  the  output  of  the  silver  mines  of  this  coun- 
try, the  closing  of  the  German  mints  to  the  coinage 
of  silver  and  the  sale  of  the  Government's  stores  for 
the  purchase  of  gold  needed  for  the  adoption  of  the 
gold  standard  had  reduced  the  price  of  silver. 

Germany  abandoned  silver  in  1871  and  adopted 
the  single  gold  standard.  The  suspension  of  silver 
coinage  was  followed  by  the  melting  down  of  the  old 
coins  and  the  sale  of  the  bullion.  This  sale  was 
stopped  in  1879.  While  it  was  going  on  the  price 
of  silver  in  London  fell  from  GQ^d.  in  1871  to  bl^d. 
in  1879.  It  is  undoubtedly  true  that  Germany's  de- 
monetization of  silver  had  much  to  do  with  this  de- 
cline in  price ;  but,  as  has  been  already  shown,  a 
decline  had  set  in  six  years  before  1871. 

During  that  six  years  silver  had  gone  down  only 
about  Id.  on  the  ounce.  While,  therefore,  the  whole 


decline  in  price  from  1871  to  1879  cannot  be  charged 
to  the  action  of  Germany,  most  of  it  is  evidently  due 
to  the  coinage  law  of  the  new  empire.  Since  Ger- 
many stopped  selling,  the  price  of  silver  has  declined 
more  than  20c?.,  and  this  decline  has  not  been  ar- 
rested by  the  two  silver  purchase  laws  enacted  by 
the  United  States. 

It  is  fair  to  assume  that  the  decline  has  been  partly 
aided  by  the  closing  of  the  mints  of  the  Latin  Union 
to  silver,  and  by  the  action  of  the  Austrian  Govern- 
ment in  deciding  to  adopt  the  single  gold  standard. 
The  Latin  Union  was  formed  in  1865.  The  metallic 
coinage  of  Continental  Europe  was  in  a  most  deplor- 
able condition,  and  the  silver  countries  found  them- 
selves, in  contrast  with  Great  Britain,  at  a  serious 
commercial  disadvantage.  Therefore,  France,  Bel- 
gium, and  Switzerland  formed  a  union,  and  they  were 
subsequently  joined  by  Greece  and  Italy.  Silver 
token  coinage  was  adopted,  and,  following  the  Eng- 
lish system,  it  was  made  legal  tender  to  the  amount 
of  50  francs,  equivalent  to  £2,  or  $10. 

In  1876  the  mints  of  the  Latin  Union  were  closed 
to  the  coinage  of  silver  on  private  account,  and  while, 
as  had  been  said,  it  is  fair  to  assume  that  this  action 
had  some  effect  on  the  price  of  silver,  that  effect  was 
not  great,  for  the  price  was  52 %d.  in  1876,  and  it  was 
not  until  1881  that  it  fell  permanently  below  52d. 
Spain  adopted  the  monetary  system  of  the  Latin 
Union  in  1868,  but  in  1878  determined  that  silver 


should  be  coined  on  state   account   only.     Austria 
suspended  silver  coinage  in  1879. 

While  the  fall  in  the  price  of  silver  was  inducing 
the  United  States  to  u rehabilitate"  that  metal  by  the 
Allison  Purchase  Act,  Europe  was  adopting  the  single 
gold  standard. 


IV 

IN    THE    UNITED    STATES    BEFORE    1873 

THE  experience  of  the  Government  of  the  United 
States  with  bimetallism  during  the  first  eighty  years 
of  its  history  was  somewhat  similar  to  that  of  France. 
It  had  a  theoretical  double  standard,  but  was  practi- 
cally monometallic.  Its  monetary  history  was  also 
like  that  of  England  in  the  latter  part  of  the  seven- 
teenth century.  Its  good  coin  was  hoarded  and  sold 
abroad,  and  the  coin  that  circulated  was  the  worn  and 
light  foreign  coin  that  came  into  a  country  where  it 
was  able  to  procure  more  than  its  intrinsic  worth. 

The  first  coinage  act  of  this  country  was  passed  in 
1792.  The  question  of  currency  at  that  time  seems 
to  have  excited  merely  a  languid  interest  in  Congress, 
and  for  some  time  it  was  doubtful  if  a  mint  would  be 
established.  The  probable  cost  of  its  maintenance 
seemed  to  be  an  insuperable  objection.  The  matter 
of  coinage  was  practically  settled  by  the  executive 
branch  of  the  Government.  For  once  those  old  and 
persistent  political  enemies,  Hamilton  and  Jefferson, 
came  together  and  decided  that  both  metals  should 
be  used,  and  that  the  ratio  should  be  15  to  1. 

It  was  the  English  ratio  and  the  French  system 


101 


coming  together.  England,  vvas:cxaniLhif)g«vli3  - 
age  question  for  herself,  and  had  temporarily  sus- 
pended free  coinage  of  silver,  but  the  people  of  this 
country  had  little  commercial  experience  to  instruct 
them  in  the  consequences  of  bimetallism,  and  accept- 
ed the  double  standard  because  gold  and  silver  had 
both  been  the  money  metals  of  the  world  from  time 
immemorial.  After  a  fashion  that  has  not  yet  gone 
out  of  date  the  people  of  this  country  insisted  on  ac- 
quiring their  experience  for  themselves  and  paying 
for  it. 


1792-183i    SILVER    MONOMETALLISM    UNDER    DOUBLE 
STANDARD 

THE  coinage  act  was  passed  in  1792,  but  the  first 
silver  was  actually  coined  in  1794  and  the  first  gold 
in  1795.  Under  the  first  statute  the  silver  dollar 
weighed  416  grains,  1485  parts  pure  and  179  parts 
alloy.  The  fine  silver  in  a  dollar  was,  therefore,  then 
as  now,  371.25  grains.  The  gold  eagle  weighed  270 
grains,  \^  fine,  so  that  a  gold  dollar  contained  24.75 
grains  of  fine  gold.  The  ratio  established  was  not 
the  true  ratio.  Gold  was  undervalued.  An  ounce 
of  gold  was  worth  more  than  15  ounces  of  silver;  it 
was  worth  15.17  ounces.  The  new  coins,  as  has  been 
pointed  out,  did  not  circulate.  The  Government  it- 
self was  largely  responsible,  for  it  permitted  cheap 
and  worn  foreign  coin  which  came  to  it  in  payment 


102 


of  r,s  customs  dues  to  go  out  into  the  circulation, 
once  more,  to  illustrate  the  truth  of  Gresham's  law. 
Gold  was  exported,  and  quantities  of  our  new  eagles 
were  seen  in  the  show-windows  of  European  gold- 
smiths. In  1793  only  were  the  legal  and  market  ra- 
tios the  same.  In  1794  the  ratio  was  15.37  to  1,  and 
not  once  so  long  as  the  ratio  of  15  to  1  prevailed,  ex- 
cept in  1793,  was  gold  down  to  the  value  fixed  by 
Congress. 

Neither  the  gold  nor  the  silver  circulating,  the  coin- 
age of  silver  dollars  was  suspended  in  1806,  and  none 
were  coined  again  until  1836,  when  1000  were  struck 
off.  None  were  coined  after  that  until  300  were 
struck  off  in  1839.  Then  the  coinage  went  on,  but 
it  was  1869  before  the  number  minted  in  any  year 
reached  400,000,  and  1871  before  it  was  1,000,000. 
In  1873,  the  year  when  silver  was  demonetized,  the 
mints  coined  only  $293,600,  which  measures  the  de- 
sire of  the  bullion  owners  of  that  time  for  the  pres- 
ervation of  silver  as  a  money  metal  at  the  ratio  of 
16  to  1  then  prevailing. 

Gold  entirely  disappeared  from  circulation  by  1817, 
and  no  gold  dollars  whatever  were  coined  until  1849, 
after  the  discovery  of  gold  in  California.  The  estab- 
lishment of  American  coins  as  circulating  currency 
was  a  work  of  great  labor,  attended  with  many  diffi- 
culties. The  early  years  of  the  Republic  were  years 
of  struggle  war,  and  financial  distress.  After  the 
dissolution  of  the  United  States  Bank  the  business 


103 


of  the  country  was  carried  on  by  means  of  paper 
currency  of  more  than  uncertain  value.  Specie  pay- 
ments were  suspended  in  1814  by  all  the  banks  ex- 
cept those  of  New  England,  and  metallic  money  was 
practically  unknown. 

So  disastrous  to  the  material  interests  of  the  coun- 
try was  the  lack  of  confidence  in  the  paper  currency 
that  in  1816  the  money  question  came  up  in  Con- 
gress for  discussion.  The  United  States  Bank  was 
rechartered,  and  the  right  of  establishing  branches 
with  the  privilege  of  issue  was  granted  to  it.  After 
that  for  a  time  the  country  had  paper  money  based 
upon  foreign  coin. 

Several  efforts  were  made  to  establish  our  own 
coin  and  to  prevent  the  inroad  of  foreign  coin,  but 
nature  insisted  on  having  its  own  way.  A  propo- 
sition was  made  to  Congress  to  return  to  the  devices 
that  had  been  found  futile  in  the  reigns  of  James  I. 
and  Charles  I.,  and  to  prohibit  the  exportation  of 
specie.  In  1816  and  1819  laws  were  passed  provid- 
ing that  foreign  gold  coin  should  not  be  legal  tender 
in  this  country,  but  this  accomplished  nothing,  and 
in  1823  all  foreign  gold  coins  were  made  receivable 
for  the  public  lands,  while  in  1834  an  act  was  passed 
making  the  dollars  of  Mexico,  Peru,  Chili,  and  Central 
America,  and  the  five-franc  piece  of  France,  legal  ten- 
der at  their  nominal  value,,  when  of  full  weight. 


104 


1834-73    GOLD    MONOMETALLISM    UNDER    DOUBLE 
STANDARD 

IN  1834,  foreign  gold  not  being  legal  tender  under 
the  laws  of  1816  and  1819,  the  basis  of  our  circula- 
tion was  foreign  silver  and  fractional  coin.  A  move- 
ment now  began  in  the  interest  of  gold.  Like  the 
silver  movement  of  to-day,  it  was  largely  protective. 
The  gold  mines  of  North  Carolina,  discovered  in 
1801,  had  begun  to  yield  a  generous  output  in  1828. 
About  the  same  time  gold  was  discovered  in  Georgia, 
and  great  results  were  expected.  Congress  under- 
took to  care  for  the  American  gold  interest  by  chang- 
ing the  ratio  and  by  also  changing  the  composition 
of  the  gold  coin.  The  ratio  was  changed  from  15 
to  1  to  16  to  1.  The  weight  of  the  silver  dollar  was 
changed  from  416  to  412.5  grains,  but  the  fine  sil- 
ver in  the  coin,  371.25  grains,  remained  unchanged. 
The  fine  gold  in  a  dollar  of  the  other  metal,  however, 
was  reduced  from  24.75  to  23.22. 

Thus,  in  the  interest  of  an  American  industry,  the 
gold  dollar,  which  had  been  worth  under  the  old  law 
$1.038,  became  worth  97-J  cents.  Silver  became  the 
more  valuable  metal  and  disappeared  from  the  circu- 
lation. Up  to  the  passage  of  this  law  about  $12,000,- 
000  of  gold  had  been  coined  in  this  country,  chiefly 
in  half-eagles.  Eagles  had  not  been  coined  since 

o  o 

1804,  and  their  coinage  was  not  resumed  until  1838. 
Double   eagles  were  not  coined   until    1850,  at  the 


105 


time  when  the  recent  gold  discoveries  had  greatly 
increased  the  production  of  the  metal.  In  1849  an 
act  was  passed  providing  that  the  gold  dollar  should 
contain  25.8  grains  of  fine  gold. 

No  sooner  had  the  silver  dollar  been  underrated 
than  silver  coins  began  to  be  exported  from  this 
country  in  large  quantities.  Silver  coin  became 
scarce  in  the  circulation,  except  the  Spanish-Ameri- 
can coins  with  which  every  one  was  familiar  thirty 
years  ago.  So  greatly  was  the  market  value  of  silver 
in  excess  of  its  coinage  value  that  the  fractional 
coins  began  to  disappear,  and  in  1853  our  fractional 
silver  was  made  subsidiary  and  token  money  by  the 
reduction  of  the  amount  of  fine  silver  in  the  coins. 
It  was  at  the  same  time  made  legal  tender  to  the 
value  of  $5. 

Thus  the  country  continued  under  a  practical  gold 
monometallism,  with  subsidiary  or  token  silver  coins, 
until  the  passage  of  the  act  of  1873.  The  silver 
dollar  was  not  in  circulation,  because  it  was  too  val- 
uable for  that  use  at  the  existing  ratio.  It  had  never 
been  in  circulation.  The  only  silver  dollars  with 
which  the  people  of  this  country  were  familiar  were 
those  of  the  South  American  and  Central  American 
countries  mentioned  in  the  act  of  1834. 

The  act  of  1834  may  be  said  to  have  deliberately 
driven  silver  out  of  circulation  and  out  of  use  as 
money,  except  for  small  change,  because  gold  was 
overvalued  for  that  purpose.  And  yet  the  price  of 


106 


silver  was  not  affected  by  that  action  of  the  United 
States,  as  the  following  quotations  from  the  London 
market  reports  will  show  : 


1833 59TV£ 

1834 59ifd. 

1335 591^. 

1836 60c/. 

1837 


1838 59jd. 

1839  60fd. 

1840 60fd. 

1841..        .  60.W 


1842 59T7^. 


Silver  increased  in  price,  and  the  increase  contin- 
ued during  the  years  when  the  output  of  gold  was 
growing  by  reason  of  the  discoveries  of  gold  mines 
in  California  and  Australia.  But  silver  began  to 
fall,  as  has  already  been  shown,  after  1866.  In  1873, 
however,  the  law  that  was  passed  omitting  the  silver 
dollar  from  the  coinage  merely  made  statutory  a  fact 
that  had  existed  for  nearly  forty  years. 


IN    THE    UNITED    STATES    SINCE    1873 

WHEN  the  act  of  1873  was  passed  extraordinary 
movements  affecting  currency  were  going  on  every- 
where. That  act  has  been  made  altogether  too  im- 
portant in  the  discussion  of  bimetallism.  It  was  in 
reality  a  mere  formal  declaration  of  a  fact.  Silver 
was  not  demonetized  by  it.  That  was  done  by  the 
act  of  1834,  changing  the  ratio  of  the  two  metals  and 
the  amount  of  fine  gold  in  a  dollar.  The  act  of  1853, 
reducing  the  amount  of  silver  in  the  fractional  cur- 
rency and  making  it  token  money,  was  also  a  move- 
ment strengthening  gold  monometallism.  Not  only 
was  the  single  gold  standard  the  result  of  the  two 
laws,  it  was  the  declared  intention  of  their  movers 
and  advocates  to  adopt  the  gold  standard  in  this 
manner.  The  silver  dollar  was  not  in  circulation, 
because  it  was  worth  $1.04  in  gold,  and  no  one  made 
an  effort,  as  by  urging  a  revision  of  the  legal  ratio, 
to  make  it  a^ree  with  the  market  ratio,  to  secure  its 

O  ' 

restoration.  The  great  fall  in  silver  that  was  to  occur 
shortly  had  not  set  in.  Therefore  when  the  bill, 
accompanied  by  the  reports  of  the  Secretary  of  the 
Treasury  and  Mr.  John  J.  -Knox,  its  author,  was  pre- 


108 


sented  to  Congress  no  comment  was  made  on  the 
fact  that  the  41 2^  grain  dollar  was  dropped  by  it 
from  the  silver  coinage  of  the  country.  The  bill 
simply  provided  that  certain  pieces,  naming  them, 
should  constitute  the  silver  coinage  of  the  United 
States.  The  412^  grain  dollar  was  not  included. 
The  trade  dollar  was  authorized,  and,  by  mistake, 
a  legal-tender  quality  up  to  $5  was  bestowed  upon 
it  as  upon  the  subsidiary  coins.  Subsequently  the 
mistake  was  rectified.  Really,  the  trade  dollar  was 
not  part  of  the  coinage  of  the  country.  It  was  sim- 
ply a  bit  of  silver  weighing  420  grains,  stamped  by 
the  Government  at  the  expense  of  the  owner  of  the 
bullion,  to  be  sold  at  a  profit  in  Oriental  countries. 

It  has  been  the  fashion  of  some  controversialists 
to  say  that  the  silver  dollar  was  surreptitiously  de- 
monetized. History  does  not  sustain  the  contention. 
As  has  been  seen  from  a  simple  record  of  the  events, 
silver  was  demonetized  in  1834.  But  whether  the 
method  of  passing  the  act  of  1873  was  or  was  not 
surreptitious  has  no  bearing  on  the  merits  of  bi- 
metallism or  of  monometallism.  They  must  stand 
on  a  sounder  basis  than  that  or  fall  altogether.  As 
a  matter  of  fact  the  bill  was  before  Congress  for 
nearly  three  years.  It  was  first  submitted  to  the 
Senate  on  April  25,  1870,  and  to  the  House  on  June 
25.  It  was  debated  in  the  Senate  and  passed  on 
June  10,  1871,  by  a  vote  of  36  to  14.  It  was  de- 
bated in  the  House  in  1872  and  passed,  with  amend- 


109 


merits,  by  a  vote  of  110  to  13.  It  was  passed  in  the 
Senate,  as  amended,  January  17,  1873,  a  conference 
committee  was  appointed,  and  the  bill  became  a  law, 
February  12,  1873.  The  reports  accompanying  the 
bill,  especially  Mr.  Knox's,  explained  the  fact,  and 
the  purpose  of  dropping  the  silver  dollar  from  the 
coinage.  This  fact  was  therefore  brought  home  to 
the  members,  who  discussed  it,  and  Mr.  William  D. 
Kelley,  Chairman  of  the  Committee  on  Coinage, 
Weights  and  Measures,  in  reporting  the  bill  to  the 
House,  said  that  it  had  been  most  carefully  and  de- 
liberately considered  by  the  committee,  who  had 
gone  over  it  "  line  by  line  and  word  by  word."  Al- 
though he  subsequently  joined  the  advocates  of  free 
coinage,  he  said  on  this  occasion  that  "  it  is  impossi- 
ble to  retain  the  double  standard." 

All  this  is  interesting  as  history,  but  it  has  noth- 
ing to  do  with  the  merits  of  the  question.  After 
1873  and  until  1878  the  country  was  not  only  in 
fact  but  in  law  on  a  gold  basis.  Silver  had  begun 
to  be  cheaper,  as  has  already  been  shown ;  but  it  was 
not  until  1876  that  the  fall  had  become  great  enough 
to  arouse  the  owners  of  mines  and  the  friends  of  sil- 
ver generally  to  the  beginning  of  a  contest. 

By  1876  the  price  of  silver  in  the  London  market 
had  dropped  from  59^o?.  an  ounce  in  1873  to  52%d. 
The  causes  of  this  decline  open  up  a  very  interest- 
ing field  of  investigation  and  discussion.  The  de- 
mand for  gold  had  been  growing  since  1849.  The 


110 


production  of  this  metal  in  twenty-five  years  from 
1851  to  1875  was  enormous.  The  value  of  the  out- 
put during  that  period  was  $3,317,625,000  as  against 
a  silver  product  of  $1,395,125,000.  Prof.  Laughlin, 
in  his  "  History  of  Bimetallism  in  the  United  States," 
has  shown  that  this  output  of  gold  was  a  trifle  more 
than  the  gold  product  of  the  357  years  from  1493  to 
1850.  The  price  of  gold  fell,  and  consequently  ob- 
tained a  still  wider  circulation  as  money.  It  drove 
silver  into  the  melting-pot,  and  threatened  the  small 
change  not  only  of  the  United  States  but  of  Contin- 
ental Europe.  There  the  Latin  Union  was  formed 
and  the  franc  was  lightened  just  as  our  own  50,  25, 
and  10  cent  pieces  were  lightened.  In  1840  the  an- 
nual production  of  gold  was  about  $15,000,000,  in 
1851  it  was  $150,000,000.  Between  1852  and  1864 
France  absorbed  $680,000,000  of  gold  and  sent 
abroad  $345,000,000  of  silver.  There  was  no  dis- 
position manifested  anywhere  to  surrender  gold  and 
to  procure  silver  in  its  place.  On  the  contrary,  a  de- 
cided preference  was  shown  for  gold,  and  nowhere 
more  than  in  France,  where,  as  time  went  on,  silver 
coins  were  changed  and  limited  in  purchasing  power, 
but  gold  was  left  untouched. 

In  this  country  the  annual  product  of  gold  in- 
creased from  $889,085  in  1847  to  $10,000,000  in 
1848.  The  next  year  it  was  $40,000,000,  the  next 
$50,000,000,  and  from  then  to  1859  it  ranged  from 
$50,000,000  to  $65,000,000.  In  1858  the  product 


Ill 


of  silver  in  the  United  States  was  $500,000.  Before 
then  it  had  never  exceeded  $50,000  in  a  year.  It 
was  not  until  after  1860  that  it  reached  $2,000,000 
a  year.  From  that  year  it  rapidly  increased,  and  in 
1873  it  was  $35,750,000,  while  the  product  of  gold 
for  the  same  period  was  $36,000,000.  The  produc- 
tion of  silver  increased,  and  gold  about  held  its  own. 

Undoubtedly  this  increase  in  the  supply  of  silver 
made  the  metal  cheaper,  but  there  were  other  causes 
than  the  increase  of  supply  to  cheapen  silver.  Along- 
side with  the  increase  there  was  a  decrease  of  de- 
mand. From  1848  to  1860,  when  the  annual  prod- 
uct of  gold  in  this  country  was  increasing  from 
$10,000,000  to  $50,000,000,  $60,000,000  and  $65,- 
000,000,  the  product  of  silver  was  inconsiderable. 

But  the  price  of  silver  did  not  materially  fall, 
notwithstanding  the  increased  production  of  the 
years  immediately  following  1860.  The  highest 
prices  ranged  from  GOfc?.  to  6L16J.  But  in  1873 
the  price  of  silver  fell  so  much  that  the  average 
price  was  59^c/.,  and  in  the  three  following  years 
the  fall  was  so  great  that  the  lowest  price  in  London 
in  1876  was  46fd  and  the  highest  58%d.  By  this 
time  the  annual  product  of  silver  had  grown  to  be 
$91,208,750  as  against  $115,756,750  of  gold.  The 
interpretation  of  this  is  at  least  that  the  fall  in  price 
did  not  result  wholly  from  the  increase  of  supply. 
The  demand  had  a  good  deal  to  do  with  it.  Much 
stress  is  laid  on  the  nW  German  coinage  act  and  the 


112 


consequent  increase  of  the  supply  of  silver  in  the 
world's  bullion  market.  The  fact  is  that  from  1871 
to  1876  the  German  sales  of  silver  did  not  exceed 
$30,000,000.  At  the  same  time  the  German  demand 
for  gold  for  the  purpose  of  establishing  the  single 
gold  standard  was  about  $414,000,000.  This  de- 
mand for  gold  had  a  greater  effect  on  the  price  of 
silver  than  the  sale  of  the  silver  coins  for  bullion. 
At  the  same  time  there  was  a  decreased  demand  for 
silver  on  the  Continent.  Belgium  and  Holland  had 
already  closed  their  mints  to  silver,  and  the  French 
mint  was  closed  in  1876.  India,  too,  helped  the 
depreciation  of  the  price  of  silver.  Her  indebted- 
ness to  England  temporarily  suspended  her  enor- 
mous power  for  absorbing  silver.  In  1869-70  the 
excess  of  India  imports  of  silver  was  $36,601,685; 
in  1870-71  it  fell  to  $4,709,685;  in  1872-73  it 
was  down  to  $3,523,220.  It  was  not  back  to  large 
figures  until  1878.  The  effect  of  the  decreased  de- 
mand is  shown  in  our  own  statistics  of  exports.  In 
1871  our  total  exports  of  silver  amounted  to  $31,- 
755,780;  in  1876  they  were  down  to  $25,329,252, 
notwithstanding  the  greatly  increased  production, 
which  in  the  same  year  advanced  from  $23,000,000 
to  $38,800,000.  Nor  did  the  decline  of  exportations 
cease  with  1876.  In  1882  they  were  only  $16,829,- 
599,  while  the  silver  product  of  the  country  had 
grown  to  be  $46,800,000. 

In  addition  to  the  increased  supply  and  the  excep- 


113 


tional  state  of  things  in  India,  the  fact  that  silver 
had  generally  gone  out  of  use  as^l  standard  of  value 
in  Europe  must  be  taken  into  consideration  in  seek- 
ing for  the  reason  of  the  fall  in  price  in  1876.  It 
was  this  fall  that  led  to  the  movement  in  this  coun- 
try to  "  rehabilitate  "  silver.  Before  this,  gold  was 
the  native  product  that  appealed  successfully  to  Con- 
gress for  protection.  Now  silver  was  becoming  the 
national  metal.  In  1876  Colorado  was  admitted  as  a 
State,  the  enabling  act  having  been  passed  in  1875. 
The  silver  interests  thus  secured  two  Senators  in 
Congress.  In  1876  the  products  of  gold  and  silver 
were  about  equal.  By  1879  the  annual  product  of 
silver  exceeded  in  commercial  value  that  of  gold, 
and  this  excess  steadily  increased  until  1893.  There 
is  no  doubt,  whatever  may  be  said  as  to  causes  gov- 
erning the  market  prior  to  1876,  that  this  rapid 
increase  of  silver  production  since  then  accounts  in 
great  measure  for  the  great  fall  of  price  from  an  av- 
erage of  52fc?.  to  about  33c?. 

The  movement  for  the  free  coinage  of  silver  in 
1876  was  very  brisk.  Several  bills  were  introduced 
in  the  House  for  the  issue  of  coin  notes  and  for  the 
re-establishment  of  the  silver  dollar.  One  of  these 
was  passed,  but  received  no  consideration  from  the 
Senate.  On  November  5,  1877,  Mr.  Bland  intro- 
duced a  free  coinage  and  unlimited  legal -tender  sil- 
ver bill,  which  was  passed,  without  debate  and  under 
suspension  of  the  rules,  by  a  vote  of  163  to  34. 


114 


When  the  bill  reached  the  Senate  it  was  placed  in 
charge  of  Mr.  Allison,  who  reported  it  back  from 
the  Finance  Committee  with  important  amendments. 
The  bill  passed  the  Senate,  February  15,  1878,  by  a 
vote  of  48  to  21.  As  it  passed  it  provided  for  the 
monthly  purchase  of  not  less  than  $2,000,000  worth 
of  silver  bullion  or  not  more  than  $4,000,000  worth 
"  at  the  market  price  thereof,"  the  bullion  to  be 
coined  into  412|-  grain  dollars.  Silver  certificates 
and  an  international  monetary  conference  were  pro- 
vided for.  Free  coinage  was  defeated.  After  some 
protest  the  House  concurred  in  the  Senate  amend- 
ments by  a  vote  of  203  to  72.  On  February  28 
President  Hayes  vetoed  the  bill.  On  the  same  day 
both  houses  passed  it  over  his  veto.  While  the  dis- 
cussion of  these  measures  was  in  progress  Senator 
Matthews  secured  the  passage  of  a  resolution  declar- 
ing that  the  United  States  might  lawfully  redeem  its 
bonds  in  silver  dollars.  The  result  of  the  passage  of 
this  resolution  was  immediately  felt.  Our  bonds  be- 
gan to  come  back  from  Europe.  In  one  week  $10,- 
000,000  of  them  were  thrown  upon  the  market,  and 
the  amount  sent  home  was  estimated  by  Mr.  Allison 
to  have  reached  $100,000,000.  We  had  warning 
seventeen  years  ago  of  what  actually  resulted  from 
the  act  of  1890. 

Under  the  act  of  1878  the  Treasury  never  coined 
more  than  $2,000,000  worth  of  silver  a  month. 
Sometimes  the  bullion  owners  demanded  more  than 


115 


the  market  rates,  when  Secretary  Sherman,  inter- 
preting the  law  as  Mr.  Carlisle  has  lately  interpreted 
it,  declined  to  make  the  purchases.  The  Govern- 
ment found  it  almost  impossible  to  force  the  new 
silver  dollars  into  circulation.  The  people  would 
not  take  them.  The  Clearing  House  in  New  York 
declined  to  receive  the  certificates  in  settlement  of 
balances,  until  they  were  compelled  to  do  so  by  an  act 
of  Congress  which  forbade  national  banks  from  join- 
ing an  association  governed  by  such  a  rule.  The 
Government  did  its  best.  It  paid  the  cost  of  trans- 
porting the  dollars.  It  discontinued  the  issue  of 
legal-tender  notes  of  denominations  of  less  than  five 
dollars.  It  issued  one,  two,  and  five  dollar  silver  cer- 
tificates, and  finally  obtained  a  circulation  for  the 
smaller  of  these. 

Fortunately  for  the  country,  the  surrender  of  large 
amounts  of  national  bank  currency  at  this  time  made 
a  place  for  the  new  silver  currency,  so  that  all  the 
evil  effects  of  a  silver  coinage  adopted  in  the  face  of 
the  action  of  the  commercial  world  and  in  antago- 
nism to  it  were  not  felt.  Under  the  act  of  1878 
the  Government  purchased  291,272,019  ounces  of 
silver,  for  which  it  paid  $308,279,261.  But  out  of 
it  the  Government  issued  in  coins  378,166,793  silver 
dollars.  The  purchases  of  the  Government  did  not 
check  the  rapid  decline  in  the  price  of  silver,  as  is 
shown  by  the  following  quotations  of  the  average 
London  price  per  ounce  ; 


116 


1878 
1879 
1880  ...................... 

1881 

1882  ...............................  .  51|f<£ 

1883  ................................  50f  d. 

1884  ..........  '  ......................  50  Jd 

1885  ................................  48TV/. 

1886  ................................  45fd 

1887  ................................  44|J. 

1888 

1889 


The  friends  of  silver  were  not  satisfied.  They  in- 
sisted that  the  Government  should  do  something  more 
for  their  favorite  metal.  On  June  17,  1890,  the  Sen- 
ate passed  a  free  coinage  bill  by  a  vote  of  42  to  25. 
The  House  did  not  concur,  and  there  was  a  compro- 
mise measure  agreed  upon  by  a  conference  committee, 
which  became  a  law,  known  as  the  Sherman  act. 
The  law  required  the  monthly  purchase  of  4,500,000 
ounces,  and  the  coinage  every  month  of  2,000,000 
ounces  of  the  bullion  so  purchased  until  July  1,  1891. 
After  that  bars  were  to  be  coined  for  the  redemption 
of  the  legal-tender  Treasury  notes  authorized  by  the 
act,  in  the  discretion  of  the  Secretary.  The  act  re- 
cited further  that  it  was  the  "  established  policy  of 
the  United  States  to  maintain  the  two  metals  on  a 
parity  with  each  other." 

The  Treasury  purchased  under  the  Sherman  law 
168,674,683  ounces  at  a  cost  $155,931,002.  At  67 
cents  an  ounce  this  bullion  is  worth  $113,012,037,  a 
loss  to  the  Government  of  $42,918,965. 


117 


The  operation  of  the  Sherman  law  was  quickly 
felt.  Although  there  was  no  free  coinage,  Gresham's 
law  began  to  act.  Holders  of  American  securities 
became  alarmed  lest  they  would  be  obliged  to  ac- 
cept payment  in  silver,  and  a  general  hoarding  and 
exportation  of  gold  followed.  The  following  table 
will  show  the  increase  of  our  exports  of  gold  coin 
and  gold  bullion : 

1888 $34,526,447 

1889 50,933,460 

1890 24,063,074 

1891 79,086,581 

1892 76,532,056 

1893 79,775,820 


Total $344,917,438 

Subtracting  imports,  there  was  in  these  years  a  net 
loss  of  gold  to  the  United  States  of  $230,234,403. 

In  the  mean  time  the  departure  of  gold  was  shown 
in  another  way.  In  January,  1890,  of  the  customs 
dues  received  by  the  Government  92.6  per  cent, 
were  paid  in  gold;  in  December  88.3  per  cent,  was 
in  gold.  In  December,  1891,  the  amount  of  gold 
received  for  customs  dues  had  fallen  to  65.4  per 
cent. ;  in  January,  1893,  only  8.9  per  cent,  was  paid 
in  gold ;  and  though  the  hoarded  gold  forced  from  the 
bank  vaults  by  the  currency  famine  of  1893  tempo- 
rarily swelled  the  gold  receipts  from  customs,  the 
proportion  in  January,  1894,  was  but  17.6  per  cent. ; 
from  which  it  rapidly  dwindled,  until  in  October 
and  November,  1894,  gold  receipts  had  entirely 
ceased. 


118 


The  business  distress  which  followed  the  loss  of 
confidence  in  our  securities,  in  one  another,  and  in 
everything  that  usually  commands  the  respect  of 
business  men,  is  only  now  beginning  to  depart,  and 
it  will  return  if  the  legislation  of  the  new  Congress 
is  as  foolish  as  that  of  its  predecessors  has  been. 


VI 

RECENT    DEVELOPMENTS 

CONGRESS  was  called  together  in  the  summer  of 
1893  for  the  purpose  of  repealing  the  Sherman  act. 
After  many  vexatious  delays,  involving  disaster  and 
loss  to  the  business  interests  of  the  country,  a  bill 
was  passed  unconditionally  repealing  the  purchasing 
clause  of  the  law.  In  the  meantime,  June  26,  1893, 
the  Indian  mints  were  closed  to  the  free  coinage  of 
silver.  While  the  effect  on  the  monetary  and  com- 
mercial relations  of  India  has  not  been  what  the  au- 
thors of  the  act  expected,  the  immediate  result  was 
a  panic  in  silver.  The  price  fell  at  once  in  London, 
reaching  30%d. ,  the  lowest  point  ever  touched  up  to 
that  date.  This  was  in  June.  In  July  the  price 
rose  to  32^d. ,  but  in  December  it  was  down  to  3l^d. 
in  London  and  70.25  cents  an  ounce  in  New  York. 
Silver  is  now  (July  1,  1895)  selling  at  30T4g-d.  in 
London,  and  at  67^  cents  an  ounce  in  New  York, 
and  in  the  meantime  the  production  of  gold  has 
enormously  increased.  At  the  first  of  the  year  the 
price  was  down  to  27T7^.  in  London  and  59f  cents 
in  New  York,  but  since  then  the  price  of  silver  has 
risen  with  that  of  other  commodities.  In  the  calen- 


120 


dar  year  of  1893  it  was  the  largest  known  in  the 
history  of  gold  mining,  the  output  being  valued  at 
$157,228,100.  The  gold  output  for  1894  was  $181,- 
669,100,  which  was  more  than  equal  to  the  rate  of 
gold  and  silver  output  of  1861-1865,  and  it  is  ex- 
pected that  the  increase  will  continue  indefinitely. 
In  other  words,  the  world  will  soon  have  as  much 
gold  as  a  basis  of  value  as  it  had  of  both  gold  and 
silver  together  in  the  days  before  the  act  of  1873 
was  passed,  before  Germany  was  on  a  gold  basis, 
and  when  th,e  Latin  Union  was  trying  to  keep  the 
two  unequal  metals  at  parity. 


VII 

A  CENTURY'S  STRUGGLE   NOW  ENDED 

THESE  developments  raise  the  point  as  to  whether 
the  whole  question  of  bimetallism,  as  compared  with 
a  single  standard-  either  of  gold  or  silver,  is  not  be- 
ing satisfactorily  answered  by  the  course  of  events 
outside  of  legislation.  Whatever  may  have  been 
true  in  earlier  periods,  when  governments  were  com- 
paratively isolated,  and  practically  omnipotent  in 
influencing  trade  conditions  within  their  respective 
boundaries,  the  developments  of  the  last  half -cen- 
tury— in  breaking  down  international  barriers,  in  the 
increasing  dependence  of  governments  upon  the  con- 
ditions of  finance  and  commerce,  in  the  unexampled 
development  of  international  as  compared  with  local 
affairs  —  have  reached  a  point  where  laws  are  as 
powerless  to  affect  the  tides  of  commerce  as  are 
imaginary  boundary -lines  to  limit  the  climates  or 
change  the  natural  relations  of  the  territories  through 
which  they  run.  In  other  words,  in  the  essential 
matters  of  currency,  commerce  has  become  all-pow- 
erful. 

Fifty  years  ago  the  world's  aggregate  of  coined 
money,  silver  and  gold,  was  probably  a  fair  supply 


122 


for  commerce  as  it  then  existed.  Since  then  the 
question  of  supply  and  demand  for  coin  currency 
has  been  vitally  affected  by  three -factors,  namely: 

1.  The   development   of   facilities  for   communi- 
cation, greater  since   1840   than   from  the  time   of 
Abraham  to  that  date,  and  the   corresponding   de- 
velopments of  commercial  expedients.      These  de- 
velopments  have  reduced  the  absolute  amount   of 
coin  necessary  for  exchanges. 

2.  Discoveries  of   new  deposits  and  cheapening 
of  gold  and  silver  production  in  America,  Australia, 
and  Africa.     These  have  been  so  important  in  the 
last  half -century  as  to  add  to  our  supply  of  these 
metals  a  greater  amount  than  had  been  secured  in  a 
thousand  years  before. 

3.  The  increasing  (now  almost  universal)  extent 
to  which  the  use  of  silver  as  a  basis  for  currency 
has  been  renounced  by  one  nation  after  another. 

Of  course  it  must  be  remembered  that  in  the  case 
of  a  comparatively  indestructible  product,  such  as 
gold  or  silver,  the  world's  stock  on  hand  is  so  great 
as  to  permit  its  value  to  be  affected  but  slowly  by 
any  increase  in  the  annual  production.  But,  even 
after  all  allowance  has  been  made  for  this,  during  the 
earlier  part  of  the  last  half-century,  while  the  first 
and  second  of  the  suggested  causes  were  in  more 
active  operation  than  was  the  third,  the  actual  result 
was  the  inevitable  one.  The  demand  for  gold  and 
silver  decreased  greatly  when  compared  with  their 


123 


rapidly  increasing  supply,  and  both  were  cheapened 
when  compared  with  the  price  of  labor. 

Daring  the  last  twenty-five  years,  however,  the 
third  factor  has  come  so  rapidly  to  the  front  that  the 
civilized  world  (practically  the  whole  world,  so  far  as 
concerns  commerical  conditions)  is  now  conducting 
its  business  upon  the  basis  of  gold  alone. 

The  movement,  which  commenced  in  earnest  as 
nearly  as  may  be  one  hundred  years  ago,  for  the  dis- 
carding of  silver  as  a  money  metal,  is  now  practically 
complete,  having  circled  the  commercial  globe.  Its 
incalculable  force  in  tending  steadily  to  depress  the 
price  of  silver  and  appreciate  that  of  gold  is,  there- 
fore, practically  spent ;  and  we  are  relegated,  as  a 
basis  for  calculation  as  to  the  future,  to  the  effect  of 
the  other  causes  noted,  both  of  which  are  still  in  full 
operation.  Commercial  developements  are  still  les- 
sening the  amount  of  metal  required  to  facilitate  a 
given  quantity  of  exchanges ;  and  the  annual  pro- 
duction of  gold  has  of  late  so  rapidly  increased  as  to 
promise  for  the  year  1895  a  greater  output  of  that 
metal  alone  than  of  both  gold  and  silver  combined 
during  any  four  years  before  1850.  Indeed,  the 
rate  of  increase  of  gold  production  during  the  last 
two  years  has  been  such  that,  if  continued  until 
1900,  it  will  have  added,  in  gold  alone,  to  our  stock 
of  precious  metals,  during  this  decade,  more  than  the 
production  of  both  silver  and  gold  for  any  ten  years 
previous  to  1890. 


124 


It  seems,  therefore,  clear,  first,  that  the  last  quar- 
ter-century has  been  that  in  which  has  culminated  a 
world-wide  movement  to  displace  silver  and  appre- 
ciate, comparatively,  the  commercial  value  of  gold ; 
that  the  operation  of  this  cause  is  not  merely  practi- 
cally at  an  end,  but  that  its  workings  have  coincided 
with  and  set  in  motion  compensating  forces;  as  a 
result  of  which  the  value  of  gold  must  henceforth 
steadily  depreciate,  as  a  consequence  of  the  steadily 
increasing  proportion  which  its  supply  from  this 
time  on  will  bear  to  the  world's  demand  for  its  use. 


THE     END 


CO 


Q 


VA"  02516 


M170681 


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